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Inflation Outlook November 2008 1 December 2008

Treasury Minister Alan Bell has welcomed the fall in the Island’s inflation rate and expressed the expectation of further reductions to come.

The Isle of Man General Index of Retail Prices just released by Treasury’s Economic Affairs Division shows the annual rate of inflation to have fallen from 6.2% in mid-October to 4.7% by mid-November.

The main factors in the fall were the early October cut in the base interest rate and the falls in fuel and energy prices.

“The fall in the inflation rate is good news for all”, commented Mr Bell. “Moreover, since the index was calculated at mid-November we have had announcements of cuts in domestic energy prices and we have seen further falls in petrol prices”.

“On top of this, there was the 11/2% cut in the base interest rate in early November, the effect of which, principally via mortgage borrowing costs, will not be reflected until next month’s inflation figure”, he added.

“So all the portents are that the fall in the Island’s inflation rate will continue. And that’s before we account for the impact of the 21/2% cut in VAT, something which I will be looking to see being passed on by retailers and suppliers”.

Whilst recognising the current volatility of global economic conditions, the Treasury Minister believes that inflationary pressures will remain much reduced in the foreseeable future.

“With all corners of the world now either in recession or severe slowdown, the demand for key commodities is now very much in check. It might be small comfort – and I think we’d all rather the circumstances and reasons for it were somewhat different – but the inflation outlook is now very much better than it has been for some time”.

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