Guernsey Quarterly Inflation Outlook Bulletin released

Tuesday 29 May 2012

This is the second quarter edition of ‘Inflation Outlook’: a Policy Council report providing forecasts for inflation. The forecasts are based on econometric models and provide composite forecasts of RPIX and RPI.

These forecasts are revised and published on a quarterly basis in the month following the Policy Council’s publication of official Guernsey inflation rates.

NB - Forecasts are presented with statistical confidence (or error) bands (the shaded area). These represent the range of possible outcomes with (in this case) a 95% statistical certainty.

Headlines

• The present central forecast is for the RPIX inflation rate (the States of Guernsey “headline” measure) to remain at 3.2% percent in the next quarter and for RPI inflation rate to remain at 3.5%.

• Central tendency of the four quarter forecast is that inflation (both measures) is expected to remain broadly similar to current levels for the next few quarters and falling slightly at the four quarter horizon (i.e. 12 months time).

• Most general indicators of domestic demand point to current economic conditions being fairly flat.

• General outlook is that the economy is likely to remain weak over the course of the rest of the year and this, together with falling pressures from projected exchange rate effects and energy price futures, are the key factors likely to reduce inflationary pressures over the coming quarters.