Inflation falls, dollar strengthens, petrol prices down?



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dollar

Yesterdays shock news that the annual rate of inflation has fallen to 4% was met with a mixed reaction as homeowners celebrated the news that interest rates may not have to increase quite as quickly as previously thought.

The UK Consumer Price Index (CPI) revealed that inflation was down from the 4.4% recorded in February, although this is still well above the Bank of England’s 2% target.

The bank monitor inflation and use the base rate, currently 0.5%, as a method of controlling it, and increasing the base rate is traditionally seen as one of the main methods to slow inflation.

The drop in inflation has been put down to a supermarket price war, as the price of food and non alcoholic drinks have fallen 1.4% mainly due to an assortment of buy one get one free and half price deals.

As a result of this fall, the Bank of England will be less likely to increase interest rates as expected this month, which was good news for motorists, as the pound fell 1.5cents against the dollar, as investors decided interest rates wouldn’t rise as soon as they thought.

With oil barrels priced in dollars, the petrol purchased from abroad becomes more expensive, the weaker the dollar is against the pound, but it’s unlikely this saving will make its way to the pumps as petrol companies look to make money in a market that has seen UK fuel consumption down 17%.

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