8:28 AM 15th November 2023
Significant Decline In Inflation Is A Welcome Ray Of Sunshine For Business
Today’s data from the Office of National Statistics, showed the annual rate of CPI inflation fall from 6.7% in September to 4.6% in October 2023.
Alpesh Paleja, CBI Lead Economist, said:
“A big drop in inflation was always expected in October, with last year’s energy price cap rise falling out of the annual comparison. But even taking this into account, inflation is heading in the right direction and the Government’s pledge to halve inflation by the end of the year has been met.
“Inflation should continue to fall in the months ahead. But the decline is set to be slow, and the CPI rate is likely to remain above the Bank of England’s target for much of next year. It’s worth noting that domestic price pressures remain sticky, and uncertainty over labour market data makes it difficult to gauge how much this is adding to inflationary pressure.
“Nonetheless, we’ve likely reached the peak of rising interest rates, and many are expecting the Bank of England to cut rates at some point next year. But with inflation set to fall slowly and the Bank of England being clear in their “higher for longer” message, businesses and consumers shouldn’t expect a significant reduction in rates anytime soon.”
Dr. Roger Barker, Director of Policy at the IoD, said:
“Although this month’s sharp decline in inflation was already baked into the numbers, due to the downward adjustment of the energy price cap, it is still an encouraging development.
The rate of core inflation (excluding food and energy), which fell from 6.1% to 5.7%, is still relatively high. However, there was a noticeable easing of inflationary pressure across a range of categories of goods and services this month. This must give hope that higher interest rates are starting to work, and that they won’t need to rise further.
However, it’s probably unrealistic to expect rate cuts until well into 2024, given the continued tightness of the labour market and the stubbornness of inflationary pressures in some areas.”
Andy Mielczarek, Founder and CEO of SmartSave, a Chetwood Financial company, said:
“Any drop in the rate of inflation is welcome news, and many Britons might be feeling a sense of relief that the worst of the cost-of-living crisis could finally be behind us.
“As consumers feel the pinch on their budgets loosen, they should take advantage of the opportunity to consider revamping their savings strategy. In particular, those holding significant sums in easy-access high-street savings accounts, many of which continue to offer paltry rates, could end up missing out on better returns in the months to come.
“The onus is on savers to search carefully for the right product and provider. For instance, as inflation continues to fall, those feeling more confident about setting money aside in a fixed-term savings account are likely to achieve better returns than those in easy-access or current accounts. And looking beyond the high street remains crucial when shopping around for the most competitive rates."
Jatin Ondhia, CEO of Shojin, said:
“November is shaping up to be a significant month, with inflation falling, a new-look cabinet, and an incoming Autumn Statement — this is a pivotal moment for people to reassess how they are managing their finances and consider how to best supercharge their savings and investments.
“Even as inflation falls, investors cannot afford to be passive; in this environment, it is important to scrutinise your portfolio and explore every available option, considering both traditional and alternative assets.
“The political and economic landscape has shifted once again this past month, and investors’ risk tolerance and long-term financial goals may need to recalibrate too. What’s more, all eyes will now turn to Jeremy Hunt and next week’s Autumn Statement. Falling inflation is a boost to the Chancellor, and it will be intriguing to see what he pulls out the famous red briefcase in the way of impactful policies aimed at fostering growth and galvanising the investment landscape – investors will certainly need to take note.”