A little bit of good news on inflation
Today’s Services Producer Price Index shows lower inflation than other recent indicators. The Index covers the price of services provided to businesses and the government, and the annual rate of increase in the fourth quarter of 2010 was 2.7 per cent. Admittedly, this is up from 2.5 per cent in the third quarter, but it is well below the 4 – 5 per cent ‘near term’ inflation forecast in the Bank of England’s downbeat Inflation Report. It is also well above the 5.1 per cent level the Retail Price Index hit in January and the 4.0 per cent Consumer Price Index. Hopefully, this will ease off a little of the pressure for interest rate hikes.