Pipeline price pressures may have peaked

The sharp falls in oil, wholesale gas and agricultural commodity prices seen over the last month have dramatically improved the outlook for inflation further ahead. Admittedly, the recent hefty price hikes announced by a number of gas and electricity suppliers mean that CPI inflation is likely to rise from July’s rate of 4.4% to around 5% in the coming months. But inflation will drop back steeply next year. Not only is petrol and food price inflation likely to fall sharply, but the weakness of demand as the economy falls into recession will help to keep core price pressures subdued.