Inflation in Guernsey may be slow to fall further says economist

Thursday, 25 July 2024 07:20

For the first time in years, Guernsey's rate of inflation outstrips Jersey's RPI.

Figures released this week by the States of Guernsey and Jersey show RPI inflation in our sister island is running at 5% while in Guernsey it is 5.3%.

Post pandemic, inflation in Jersey hit nearly 13% while in Guernsey it did not rise above 8.5%. In contrast, the UK experienced a 20% peak, but their rate is now at the Bank of England target of 2%.

IoD economist Richard Hemans says Guernsey's may take time to drop:

"Guernsey’s rate of inflation is stubbornly high and will likely exceed that of our closest neighbours, which could undermine our competitiveness if not addressed."

He says the key States' policy may help:

"Inflation in Guernsey is being driven by the high cost of housing and labour. The island is an attractive place to live and work, and the supply of housing and labour remains very tight.

The States of Guernsey’s focus on providing more housing is exactly right, because it will have both long-term economic and social benefits."

Mr Hemans says Covid was a key driver of a higher RPI:

"Excluding food and energy, core inflation was 4.4% compared with 4.9% at the end of March 2024. The bulletin again highlights the material increase in inflation since the pandemic, with prices increasing by 24% over the last four years, compared with just 13% in the six years before that. The financial cost of the pandemic has been enormous and destabilising."