Sharpest fall in inflation in 16 months will be of more comfort to policy makers than families 14 December 2022 Annual CPI inflation fell to 10.7 per cent in November – down from 11.1 per cent in October – its biggest fall since July 2021. But this fall will be of more comfort to policy makers than families, with price rises still massively outpacing pay rises, the Resolution Foundation said today (Wednesday). Inflation fell last month following an expected fall in fuel price inflation, an unexpected fall in the cost of some goods such as clothing and alcohol, and a welcome slowing of food inflation. With food and energy prices still the main drivers of inflation, the Foundation’s analysis shows that the effective inflation rate for the poorest tenth of household is – at 12.1 per cent – far higher than that experienced by the richest tenth of households (at 9.4 per cent). The Foundation says that the larger than expected fall in inflation will be welcomed by policy makers at the Bank of England, as it will ease the pressure to raise interest rates during a possible recession, and policy makers in the Treasury, as this will ease the pressure on the public finances. However, with price rises still massively outstripping pay rises – nominal regular pay rose by 6.1 per cent in the three months to October, falling by 2.7 per cent in real terms – families are still getting poorer and will draw little comfort from the latest data. Jack Leslie, Senior Economist at the Resolution Foundation, said: “Inflation fell at its fastest rate in 16 months in November, driven by falling fuel price inflation and a welcome slowing in food price inflation. Britain may now be past its inflation peak, which is good news for policy makers at both the Bank and Treasury as they grapple with rising interest rates and public debt. “But with price rises still massively outstripping pay rises – and Britain’s poorest families facing an inflation rate of over 12 per cent – families are still getting poorer month-on-month, and the cost-of-living crisis will continue to deepen in 2023.”
