Fresh round of QE for British economy on the cards as inflation dips
20 Jun 2012
Declining petrol prices in Britain pushed inflation to its lowest level over two and a half years last month, with the Bank of England poised to take fresh action to stimulate the economy.
In a welcome bit of good news for recession-hit households, the Office for National Statistics (ONS) said the annual inflation rate was down to 2.8 per cent last month from 3 per cent in April, as measured on the consumer price index.
Though inflation was still well above the Bank of England's target of 2 per cent, the fall is expected to reassure policymakers that they could go ahead with a fresh round of quantitative easing – buying government bonds with electronically-created money, that would not cause a renewed surge in prices.
The ONS cited motor fuels as the biggest factor for the decline in inflation, with petrol prices easing 4.5p a litre in a single month at £1.37.
Commodity prices have registered a steep decline on world markets as investors worry over the possibility of a global slowdown. During May the cost of a barrel of Brent crude retreated from $120 to $103 and has fallen further since then, to just over $83.
On the retail price index measure, which includes housing costs, the ONS said annual inflation fell to 3.1 per cent in May from 3.5 per cent in April.
