Inflation falls further
21/02/2012
The official measure of inflation, the Consumer Prices Index (CPI) fell sharply last month to a 14-month low of 3.6% from 4.2% in December, according to the Office for National Statistics. The Retail Prices Index, which includes mortgage payments, also fell from 4.8% to 3.9%. The main reason for the severity of the drop-off is that the VAT rise from January 2011 is no longer skewing the data, while stable petrol prices and a fall in energy bills have also helped pull inflation down. The Bank of England expects inflation to keep falling throughout the year, but other commentators disagree, arguing that while the falling utility prices are welcome, they can't be relied upon to stay that way.
Whatever lies ahead, it's clear that, as with anything investment-related, it is hugely difficult to predict the short-term and any asset class that traditionally protects against inflation remains helpful. Diversification of risk is still key.
