Posted By Jessica Weisman-Pitts
Posted on October 31, 2022
LONDON (Reuters) – Britain’s energy price cap for consumers and government-funded discounts on bills for businesses will push official measures of inflation lower, the country’s statistics office said on Monday.
The Office for National Statistics said the Energy Price Guarantee (EPG) for households, and the Energy Bill Relief Scheme for businesses, would lower the unit prices of energy that feed into inflation indexes.
The consumer prices index “will hence be lower while the schemes are in operation than if the EPG had not been introduced,” the ONS said in a statement.
Similarly, the energy bill scheme for businesses would help to lower the input measure of the producer prices index, the ONS said.
Economists and bond investors had been looking closely at whether statisticians would classify various support packages as price cuts for consumers that would directly lower headline inflation rates – and with it debt interest costs for the government arising from inflation-linked bonds.
In August, the ONS ruled that British government energy bill rebates for consumers cannot be viewed as lowering inflation, since they represented an increase in household income rather than a cut in household spending, which the CPI is based on.
Annual CPI inflation returned to a 40-year high of 10.1% in September and the Bank of England expects it will peak at just below 11% this month.
(Reporting by Andy Bruce, Editing by Kylie MacLellan)