IoD: Low inflation provides a boost, but rise is ‘in the pipeline’

Responding to official inflation figures, showing that the Consumer Price Index (CPI) fell to 1.7% in August, Tej Parikh, Chief Economist at the Institute of Directors, said:

“The drop in inflation will buoy consumers, but upward price pressures are in the pipeline.

“Allied with falling inflation, the sturdy growth in pay packets will temporarily boost households’ spending power and offer some uplift to retailers. However, domestic and international factors are conspiring to push UK prices up in the near future.

“Higher wages will eventually translate into inflationary pressure, while the recent decline in the value of the pound and concerns over oil supply will lead to increased input costs for British firms, raising prices across the supply chain.

“The Bank of England will no doubt be wary of the upside risks to inflation down the line. Despite this, with subdued economic growth, a disorderly no-deal Brexit still possible, and a global slowdown thrown into the mix, the MPC is likely to keep interest rates on hold to support the economy.”