Economics expert at UEA warns that borrowing will continue to be pricey in 2024
It's despite inflation falling to just below 4% for the first time in two years
An economics expert at UEA is warning that borrowing will continue to be pricey next year - with interest rates expected to stay above 5 per cent, for months yet.
It's despite inflation falling to just below 4% for the first time in two years, largely due to the prices of fuel and food coming down.
"We're moving in the right direction"
Dr Ritchie Woodard works at the University of East Anglia:
"The important thing to remember is that lower inflation doesn't exactly mean that prices are coming down.
"It does mean that they are rising at a low rate than the were previously. If your wages still aren't rising with inflation- you're still not becoming better off.
"There's no guarantee that inflation will keep decreasing. As the goods that cause this decrease- if they go up a little bit next month or so, we might be seeing slight increases.
"But I do think we're moving in the right direction.
"Part way through 2024 before we see any cuts"
"It's important for the Central Bank to keep their credibility- to it's inflation target. So they will be keen to keep that interest rate higher for a little bit longer.
"It was expected to be possibly part way through 2024 before we see any cuts. That may now come a little earlier- but we're not talking at the start of the year.
"The price of petrol at the pump has fallen down a little bit, which has driven this slow-down.
The prices in the supermarkets, don't expect them to fall anytime soon. But we hopefully won't be seeing the increases that we have been seeing over the last year or so."
The wider picture:
Consumer Prices Index (CPI) is now at the lowest point it's been since September 2021, with it falling from 4.6% from October to 3.9% in November.
It was a far bigger fall than forecast, with most economists expecting inflation to have eased back to 4.3% last month.
Prime Minister, Rishi Sunak said on Wednesday the latest fall in CPI was "good news for everyone in this country".
But the Bank has been quick to warn recently that the job of bringing inflation back to its 2% target is far from done and has poured cold water on speculation over an imminent interest rate cut- from 5.25%.
Annual food price inflation, dropped to 9.2% last month, down from 10.1% in October, and the lowest rate since May last year.
While Housing costs fell to 4.2% in November, down from 4.7% in October. With the Retail Prices Index dropping to 5.3% from 6.1%.