View more on these topics

Falling oil price ‘means MPC should take its time’

Falling oil prices are likely to lead to another bout of deflation and mean the Monetary Policy Committee should “take its time over raising interest rates”, says Capital Economics.

The price of oil is at a six-month low, with a barrel costing under $50.

CPI inflation was 0 per cent in July, although core inflation – which is a measure that strips out certain items that face volatile price movements – was at 0.8 per cent.

Capital Economics says “domestic price pressures are still weak”, meaning inflation is likely to strengthen only gradually next year.

Capital Economics senior UK economist Samuel Tombs says: “Looking ahead, inflation is likely to turn negative again for a couple of months. Supermarket competition should drive down petrol prices before long. In addition, British Gas will cut its gas prices by 5 per cent in late August and other utility companies are likely to follow suit.

“And while inflation is likely to strengthen when the anniversary of the sharp fall in oil prices in late 2014 is reached, we expect it to remain below the MPC’s 2 per cent target during 2016. 

“Although pay growth has risen, productivity is reviving too, keeping a lid on firms’ unit wage costs.

“Meanwhile, weak growth in global demand and a supply overhang should keep commodity prices subdued. As a result, the MPC should be able to take its time over raising interest rates next year.”

Recommended

Money-Notes-Currency-GBP-700.jpg

Remortgage loans surge by 34%

Remortgage lending surged in June as borrowers prepare for the first rise in base rate in over six years. Figures from the Council of Mortgage Lenders, published last week, show remortgage lending was up 34 per cent year-on-year to £5.1bn. By volume, remortgage loans were also up annually, by 31 per cent to 31,600. The […]

Building-A-House-Home-Frame-700.jpg

Govt sets up £36m pot for starter homes

The Government has created a £36m pot to pave the way for the building of thousands of starter homes for first-time buyers. The fund comprises £26m for the Government to identify and purchase brownfield sites and £10m for local authorities to prepare more brownfield land for the development of starter homes. The idea behind the […]

boardroom

Paul Wareham becomes Countrywide’s surveying chief

Countrywide has appointed Paul Wareham as managing director of its surveying services division. Wareham, who was previously director of field operations for the surveying division, joined Countrywide in June 2013. Prior to this he was senior manager of commercial development at Colleys and has also held posts within Lloyds Banking Group. Wareham says: “We will […]

Newsletter

News and expert analysis straight to your inbox

Sign up