Let me equate the government’s 2 per cent target for inflation into pounds and pence in my own pocket: 2p.
Last year, inflation apparently averaged at 1.5 per cent, with a high of 1.9 per cent and a low in December, we’ve recently learned, of 0.5 per cent. The latter figure is 1.5 per cent below the Bank of England’s 2 per cent target.
Average wages, excluding bonuses, grew by 1.3 per cent in November, according to official forecasts which suggest the cost of living is finally beginning to ease. In November, the Bank of England said it expected average salaries to be 2 per cent up by the end of this year.
When inflation falls more than 1 per cent below the Bank of England’s 2 per cent inflation target, the Bank of England governor has to write a letter to the chancellor to explain why this has occurred, as he will this month.
Elsewhere, the minutes of the January Monetary Policy Committee meeting, published today (21 January), revealed of the nine MPC members not one voted for an increase in the base rate due to the current low inflationary environment. Appetite for a rate rise has receded.
The apologetic letter that will have to be penned by Mr Carney reminded me why I eye cynically the inflation statistics that are spewed out of Westminster to justify their interference in our lives. The statistics they produce for inflation just do not ring true to me.
The truth is, whatever the inflation figures suggest about cost of living - and I did get a pay rise - I still feel out of pocket.
I don’t feel like I had to only spend £1.02p last year to get the same amount I would have got for £1 in 2013. I suspect many others feel the same. Heck, even the cost of my four-year’s extra-curricular activities went up by more than 2 per cent last year.
With my High Street approach to inflation, I will acknowledge that since Christmas the competition of the likes of Aldi and Lidl plus the drop in the cost of oil has pushed down – after many years of spiralling upwards - the price of a pint of milk or cost of a loaf of bread.
I am optimistic that perhaps this year inflation will eat into my pound less than it has done in the past.
But, don’t tell me for one second that I have only had to pay two pence more than I did last year to get the same value I did for a pound the year before.
And that being the case, stop using it as the sole basis for decisions on economic policy or any other policy intervention.
emma.hughes@ft.com
