Inflation rise warning as electricity price goes up

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INFLATION could rise because of Brexit and electricity price hikes.

(Picture By Peter Frankland, 24924685)

The warning is contained in the latest Guernsey economic and financial stability overview document published by the States.

The annual change in the retail price index, excluding mortgage interest payments (RPIX) was 2.1% in March and has not exceeded 3% since 2012, according to the report.

It also said that the measure continued to be lower than equivalent ones in Jersey and the UK.

The rise in the cost of services continued to be the ‘primary driver’ of inflation in Guernsey and the UK – but that RPIX could fall a ‘little further in the second quarter’ of 2019.

It also highlighted the impact of changes in on-island electricity tariffs. ‘Planned increases in electricity prices are likely to contribute to an increase in inflation measures in the second half of the year,’ said the report.

Guernsey Electricity has announced that there will be a tariff increase of 6.8% for three years, starting on 1 July

It will be the first change in electricity tariffs since 2012, and equates to approximately an additional £70 per year for an average Economy 12 customer.

Guernsey Electricity has said the price change would enable it ‘to recover uncontrollable costs incurred over the last two years, created by increases in external costs to import electricity and generate on-island’.

On Brexit, the Guernsey economic and financial stability overview report said: ‘The Bank of England maintained the bank rate at 0.75% in May. Within their inflation report, the Monetary Policy Committee suggested that the monetary policy response to Brexit “could be in either direction” and would depend on the timing and nature of the withdrawal from the EU.

‘Significant fall in the value of sterling in connection with Brexit or the imposition of trade tariffs could push inflation towards the upper end of the forecast range.’

Will Green

By Will Green
Business Editor

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