David Cameron is back on holidays again, this time to Cornwall. He missed a trick. His economic recovery is making the pound strong and, ergo, the continent cheap for British holidaymakers. This also makes imports cheaper which has, in turn, cut UK inflation to 1.6 per cent in July – down from 1.9 per cent in June. This will be deeply annoying for Ed Miliband, as it interferes with his ‘cost of living crisis’ narrative. This had more potency when inflation was high (see the graph above) but it becomes that much harder to push the line now. Especially when inflation is expected to trot along near the target of 2 per cent until the election.
Of course, the measure that most of us grew up with calling ‘inflation’ – the RPI index – is almost a full percentage point higher. But at 2.5 per cent even that is at the target set by the last government.
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