Dear Philip…

September’s inflation (CPI) figures have topped 3% pa, according to the latest release from the ONS. This is an important threshold in that it is greater than the 1% tolerance on either side of the 2% target that the Bank of England (BoE) is obliged to maintain. It also triggers the requirement for Mark Carney to write to Philip Hammond explaining why it has failed to do so. Although that letter is unlikely to be either surprising or written with any genuine contrition, it does pile the pressure back on the BoE to review its position on interest rates. Taken at a more granular level, the ONS release shows the increase in the rate comes from food, alcohol, recreation and transportation (particularly airfares), whereas women’s clothes actually cost less than this time last year. Inflation can, of course, be good for retailers, so long as the amount demanded at the new price does not fall. With real wages falling, however, that remains a key risk, especially for discretionary spend where demand is relatively elastic.