Domestic inflation at record high while global inflation drops

It is a small step in the right direction that overall annual inflation has fallen from 7.2% to 6.7%. It is of course still twice the maximum agreed to by the Government and three times the midpoint targeted.

But what is really interesting is that all the decrease has come from the tradable sector, which is the sector with international competition. That has dropped from 8.2% to 6.4%. The quarterly figure for March 2022 was 2.4% and March 2023 was 0.7%.

But non-tradable or domestic inflation has actually increased from 6.6% to 6.8%. The quarterly figure for March 2022 was 1.5% and March 2023 was 1.7%. The 6.8% for non-tradable inflation is the highest since they started recording it over 20 years ago.

So basically what is happened is the international component of inflation is dropping, but the domestic component is still increasing. This suggests the OCR will still go up at the next review.