Inflation Falls To 4.2%

18 January 2012 - Which Way to Pay

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Inflation Falls To 4.2%

The Office for National Statistics said that consumer prices index inflation dropped to 4.2% in December from 4.8% in November. The Bank of Ireland has predicted gross domestic product growth of about 1% in 2012. Economists forecast inflation to keep going down as oil prices come down and last year’s VAT increase is absorbed. 2011 saw inflation rising from 1.3% to around 3% with the economy growing by 1%. Dan McLaughlin, chief economist, has said “The acceleration was largely due to two factors unrelated to Irish domestic spending – energy and mortgage interest.”. The decline in the rate of inflation seen in December will bring some welcome relief for household budgets and consumers after what has been a long period of slow wage growth and increased prices.

The good news is this trend is likely to continue, particularly as big UK energy providers reduce prices. With interest rates likely to hold at 0.5 % at least for now, the Bank should be able to reach its 2 % inflation target. Dr Esmond Birnie, economist said that, “Overall, the decline in inflation is good news for beleaguered households, with further falls likely as last year’s VAT increase and this week’s energy price cuts work their way through the system.” The Bank of England will also welcome falling inflation as it justifies any further monetary stimulus by way of quantitative easing.

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Related Links:
• Office For National Statistics

• Bank of Ireland

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