Inflation hits all-time low
Thursday 22nd January 2009, 2:30PM GMT.
INFLATION in Guernsey is at its lowest since records began in 1965.
But figures released yesterday show that the dramatic reduction in RPI, from 5.8% in September to 1.2% at the end of December, was not caused by islanders penny-pinching in the current economic climate.
The huge fall is the result of reductions in mortgage repayments caused by the Bank of England base rate cuts from 5% to 2% during the final quarter of last year.
Commerce and Employment minister Carla McNulty Bauer (pictured) said the fall would benefit consumers.
‘It’s quite a dramatic decrease,’ she said.
‘It is primarily external influences that have affected the figure, such as the Bank of England base rate and fuel prices.’
There were similar, although not quite so severe, reductions in figures released for the UK and Jersey.
Jersey’s inflation fell from September’s 6.4% to 3.3% while the UK’s RPI figure now stands at only 0.9%, down from 5% over the same period.
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This amazing drop seems whether the product of creative accounting or the product of a means of a means of calculating RPI that does not reflect reality in the normal household.
Anyone here really believe that their cost of living has fallen a full 4.6% in the last quarter?
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For the handful of people with tracker mortgages the supposed drop in inflation may be realistic. For everyone else this just doesn’t ring true.
Only a week ago we were being told that the average house price in Guernsey has risen to £418k.
When the price of crude oil shot up last year the price of petrol at the pumps in Guernsey rose just as dramatically – oil prices have now fallen but I notice that not all of that reduction has been passed on to the consumer with the same enthusiasm.
In the shops I can’t say I have noticed any meaningful reduction in prices. Certainly not in the price of food which remains very high compared to the UK. Bread prices are just silly.
For years we have been told that our prices are high because of import costs – but when you take into account the fact that we don’t pay VAT or duty that argument rings a bit hollow too.
I am led to the conclusion that we Guerns are either very shrewd and aggressive business people – or tight fisted greedy scrooges – depending where you are standing.
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CD
Can I respectfully suggest an alternative conclusion, in that the ordinary Guernsey person is being taken for an expensive ride?
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CPI or RPI Make your minds up. RPI (Retail Price Index) served very well untill it was decided that because real estate was going to be driven up (by banks relaxing criteria to borrow) in order to stimulate the economy, it would appear beneficial to remove this from inflation calculations. Thereby reducing the amounts payable on such things as wage and pension payments that were increased by the cost of living.
Now we have a deflation of house values and mortgages due in part to the Bank of England reducing interest on debt.
Hey presto RPI is being mentioned again as it is beneficial to now include the cost of housing to reflect a lower inflation rate than would be the case than with CPI.
This has come from the mouth of Commerce and Employment minister Carla McNulty Bauer.
I for one as a member of the public do not want (although have come to expect) illusion from the elected.
You may think you can fool all of the people all of the time but that statement from such an office is a blatant insult to my intelligence and can only lead to less confidence in the elected.
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For a realistic figure we really need to look at RPI excluding housing costs, as many people rent and do not have a mortgage. For them the rate of inflation is higher, and quite often they are the ones who struggle most with the cost of living.
It’s easy to be clever with figures and hide the true position.
BBC Guernsey reported that the RPIX, which does not include the cost of mortgages, was 4.6% in December – a fall of 1.6% on the previous quarter.
Some difference.
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