What would a fall in inflation this year mean in terms of prices?

[SeasonsBleatings]

I am very confused! If a punnet of tomatoes was 90p last year but increased to £1 in January 2023 due to 11% inflation last year, would a fall to 5% inflation this year mean tomatoes would end the year at £1.05 a punnet? So the current high prices won't actually fall unless we go into negative inflation?

Thanks in advance!

Yes. Lower inflation simply means the prices will continue rising but not as fast. They would only go down if there is deflation which is very unlikely atm.

Thanks a lot, that's what I thought but was hoping prices wouldn't keep on rising...

Yes, except food inflation is currently at 19% I think. But, yes, that's how it works.

It's like travelling at 60mph, if you then go at 50mph you're still going forward but take longer to get to your destination. You aren't going backwards.

Unfortunately yes prices won't fall, just rise less slowly. I think the government with their 'halving inflation' pledge is hoping that lots of voters are equally confused!

We don't want deflation though, because that can lead to terrible recessionary negative feedback loops.

If tomatoes cost £1 in January 2022 then they will cost £1.10 in January 2023 with 10% inflation. If inflation falls to 5% in January 2024 they will cost £1.15.

The monthly inflation rate they quote is based on the price 12 months prior. So if inflation is 7% in July 2023 , it means things cost 7% more in that month than the prices in July 2022.

Or at least that's how I understand it haha

That does make sense! It's pretty miserable TBH to think we're not going to see any kind of return to 'normal'