Inflation dropping

November’s drop in inflation (RPI 3.0%, CPI 4.1%) could be the first step in a more prolonged fall if the latest forecasts are right.

The average of independent forecasts collated by the Treasury is that RPI inflation will be negative by the fourth quarter of 2009 at -0.8%. Other inflation measures could still be positive, just about (CPI 0.8%, RPIX excluding mortgage interest 0.7%). These figures are by no means set in stone: forecasters were slow to predict the high levels of inflation seen at the end of last year, for example, and individual estimates for fourth quarter RPI vary widely from -3.2% to +1.7%. The last time that RPI was negative was in March 1960.