Debt management company welcomes fall in inflation
Released
on: December 2, 2008, 5:12 am
Press
Release Author: Gregory
Pennington
Industry:
Financial
Press
Release Summary: Debt management company Gregory Pennington welcomes
the recent fall in inflation – in particular, the indication
that some of the financial pressures on struggling borrowers are
starting to ease.
Press
Release Body: Welcoming the recent fall in inflation, debt management
company Gregory Pennington
highlighted the significance of this drop to people struggling
to manage their debts.
In
October, the CPI (Consumer Price Index) measure fell from 5.2%
to 4.5% – the largest month-on-month fall in 16 years. Having
said that, the reading of 5.2% was the highest reading in 16 years,
so even a reduction of 0.7% falls far short of returning inflation
to a ‘normal’ level.
“Remember the Bank of England’s
target for CPI inflation is just 2%,” said a spokesperson for
the debt management
company. “At 4.5%, today’s rate of inflation still means prices
are rising more than twice as fast as the Bank would like – this
reduction simply means that the speed with which things are getting
more expensive is slowing.
“More
to the point, CPI has been over the Bank of England’s 2%
target ever since October 2007, so today’s consumers are
still dealing with the cumulative impact of a full year of high
inflation. And the timing makes that elevated cost of living particularly
dangerous: today’s consumers are also dealing with record
levels of personal debt, as well as rising unemployment.”
As
a result, there are many people finding it hard to manage their
debts: trying to stretch a shrinking budget further each month.
“For anyone in that position, any decrease in inflation
can’t come fast enough. They’ll be relieved to see
some expenses – such as petrol – coming down, but
many other things are still far higher than they were a year ago.
A recent article in The Guardian, for example, reported that a
basket of 24 staple items in the UK’s biggest three supermarkets
now costs 17.8% more than it did last November.”
Looking
forward to next year, it seems the Bank of England is expecting
inflation to eventually drop below its 2% target, and perhaps
as low as 1%. “This is good news for two reasons,”
said the spokesperson for the debt management company. “Not
just because it’ll mean prices are (relatively) coming down,
but also because it could allow the Bank to cut the base rate
even further.
“Clearly,
a lower base rate could help many people currently struggling
with their finances. People on tracker mortgages will see the
most immediate benefit – many of them have already seen
their mortgage payments drop by hundreds of pounds compared with
July, when the base rate stood at 5.75%.”
Nonetheless,
too little inflation can be as dangerous as too much – and
we’re now facing the possibility of deflation in 2009. While
economists agree that a short stint of deflation would not be
a problem, any sustained period of shrinking prices could seriously
damage the economy.
Deflation
means a decrease in the price of property, shares and goods of
all kinds. People therefore wait to buy expensive items, as it
only makes sense to wait until the price comes down. Falling demand
means companies sell less and are forced to reduce their workforce.
“It’s
clear the Bank of England has a delicate balancing act ahead of
it: when it comes to normal people managing their debts, deflation
could be as big a danger as high inflation.”
Web
Site: http://www.gregorypennington.com/
Contact
Details: Melanie Taylor
melanie.taylor@gregorypennington.com
0845 056 6480
Pennington
House
Carolina Way
South Langworthy Road
Salford
M50 2ZY
2010
