Inflation Report

Quarterly Bulletin 1993 Q3
Published on 01 September 1993

The Inflation Report reviews recent developments in inflation and presents the Bank of England's analysis of future prospects. It contai ns seven sections covering:

(i) recent price developments;
(ii) monetary and fi scal policy;
(i ii) demand and output;
(iv) the labour market;
(v) price dynamics;
(vi) the prospects for inflation; and
(vii) conclusions.

Inflation has continued to fall throughout the period since the May Report. The headline inflation rate has fallen to 1.2% a year, the lowest for nearly thirty years. Underlying inflation, defined in terms of RPIX, has fallen from a rate of 3.5% in March to 2.8% in June, the lowest figure si nce the index first became available.

The inflation outturn has been lower than projected at the time of the last Report. This is partly because food, alcohol and tobacco did not increase in price as rapidly as expected, taking into account the usual seasonal pattern, and partly because price increases across the range were lower than implied by their recent behaviour. Inflationary pressures have continued to weaken. Such large divergences between the outturn and the previous projection constitute news about underlying inflation. The ratio of retail to wholesale prices fell more than expected. The impact of sterling depreciation on import prices has been offset by a reduction in unit labour costs, leaving total costs broadly unchanged.

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