The Office of National Statistics have reported that inflation fell to 2% in December 2013. That’s the Government’s target for inflation even though it has not met it for some years. Mr Cameron said it was “welcome news”.
Before we all rejoice, unfortunately that is based on only one measure of inflation – the Consumer Price Index (CPI). On the more widely used Retail Price Index (RPI) inflation was actually up from 2.6% to 2.7%. In reality the RPI is probably more relevant to private investors in terms of the basket of items they purchase. But the CPI is of course the Government’s preferred measure of inflation because it regularly gives a lower figure for inflation than RPI.