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UK inflation tipped to fall

Catherine Deshayes

Following weeks of scaremongering in the press and dire forecasts from industry experts, could this week's inflation figures hint at better times to come?

The figures showing that the Consumer Prices Index (CPI) rate has hit 4.4%, may not be as bad an indicator as may have been thought.

As this is the highest level since records began in 1997, some experts are suggesting that inflation is close to its peak and will begin to fall back in the months ahead.

Major factors behind the record high are food, oil and domestic energy.

According to the Office for National Statistics, food, thanks to the growing cost of meat, was the largest contributor to inflation, up a whopping 13.7% in the last year.

Charles Davis, an economist at the Centre for Economic and Business Research, is one expert who believes that the inflation figures may signal healthier times ahead. "If you look at the actual month on month figures, prices were flat in July, and there was a 0% growth in the CPI for June and July.

"The reason for the rise in CPI was that in those same months in 2007, prices actually fell," Mr Davis added.

If some industry experts are proved right and inflation does start to tail off, this in turn could boost the mortgage market, as the Bank of England may be able to start cutting back interest rates again, which could lead to cheaper mortgages.

Nevertheless, the question remains over what is going to make inflation come down, and there is a widespread view that that slower growth will do the trick.

Picture by danzo08