Glimmer of light at the end of a long tunnel?

BRITAIN’S inflation nightmare is finally abating with the annual increase in consumer prices dropping below 10 per cent last month.

And there could be more relief to come as Liz Truss’s commitment to limiting average household energy bills to £2,500 over the next two winters makes a positive impact on the cost of living crunch.

The drop-off in the headline rate of inflation will be a source of relief for all of us and, of course, in No 10. It could help ease fears of a winter of discontent if trades unions, which have suspended industrial action during the period of national mourning, moderate some of their more outrageous demands.

Unfortunately, food prices are still rising in spite of an easing in supply chain bottlenecks. The big food manufacturers have mainly chosen to maintain profit margins and pass on the higher costs to the grocery chains and consumers.

Moderating prices are leaving some analysts with egg over their faces. At the end of last month leading investment bank Goldman Sachs predicted UK consumer prices could reach an alarming 22 per cent in January 2023.

Its dire forecast was among the factors that sent the pound tumbling on the foreign exchange markets. In its latest assessment, just issued, Goldman said it now expected UK consumer prices to peak at 10.9 per cent next month. The Bank of England had also warned that inflation will rise to 13.3 per cent in the final months of the year but will now be likely to have to backtrack.

The current inflation rate of under 10 per cent is closely aligned with our main competitors in the G7 and considerably lower than in the Netherlands, Belgium and Spain.

It is still way above the Bank of England’s official target of 2 per cent, which means there will be little relief for homeowners in the months ahead, as interest rates continue to climb.

Nevertheless, after a gloomy year, there is a glimmer of light at the end of a long tunnel.