UK inflation figures fall as expected (almost)

The UK Inflation figures for December, released this morning, behaved almost impeccably, with just a minor disappointment being the slightly smaller than expected fall in year-on-year Retail Price Inflation. (RPI - the rather broader measure of inflation than the Bank of England's target-Consumer Price Inflation, or CPI). RPI has a much closer approximation to reality for most consumers, and is still the benchmark for billions of pounds worth of indexed pensions, salaries and prices).

The year-on-year figure for RPI was +4.8 percent, versus expectations for +4.7 percent, and the month-on-month figure edged stubbornly higher to +0.4 percent, from +0.2 percent last month and against expectations for +0.3 percent. The CPI figure showed its expected fall to +3.0 percent year-on-year, against the Bank of England's target of 2 percent.

The falls in inflation were lead mainly by fuel and clothing, and by the mechanical statistical consequence of the 'disappearance'of the oil price rise and the Value Added Tax hike of a year ago. The moderation in inflation certainly tallies with anecdotal evidence of an early sales season, (well before Christmas in some cases), and of savage discounting.

With dire economic prognoses abounding, and the economy probably already in negative growth territory, plus the deepening threat from the Eurozone, one has to expect the Bank of England to expand its programme of Quantitative Easing at its next meeting, on February 9, probably to the tune of another £75 bn.

This is an important week for UK data, with unemployment figures due for release tomorrow and retail sales on Friday.