TNAG-2353-FCO40-3423-Visits-by-Lord-Caithness--Minister-of-State-for-Foreign-and--1991 — Page 180

CONFIDENTIAL

001713

MD AN 2568

7.

INFLATIONARY PRESSURES AT THE CONSUMER LEVEL INTENSIFIED DURING THE FIRST FOUR MONTHS OF 1991, PEAKING IN APRIL. THEY HAVE MODERATED GRADUALLY SINCE THEN. THE PACKAGE OF COUNTER-INFLATION MEASURES ANNOUNCED BY THE GOVERNMENT IN MAY HELPED IN THIS. A

TEMPORARY UPSURGE IN THE PRICES OF CERTAIN ESSENTIAL FOODSTUFFS ACCELERATED CONSUMER PRICE INFLATION IN JULY AND AUGUST. BUT AS THESE PRICES STABILISED, THE TREND OF MODERATION CONTINUED.

8. THE CONSUMER PRICE INDEX (A) ROSE BY 12.6 PER CENT IN JULY, 12.7 PER CENT IN AUGUST AND 11.5 PER CENT IN SEPTEMBER. TAKING THE FIRST NINE MONTHS TOGETHER, THE YEAR-ON-YEAR RATE OF INCREASE IN THE CPI(A) AVERAGED 12.4 PER CENT.

9. A FURTHER MODERATION OF INFLATION IS EXPECTED IN THE COMING MONTHS, ALTHOUGH THE PACE OF ADJUSTMENT IS LIKELY TO BE GRADUAL. ALLEVIATING FACTORS INCLUDE THE LESS RAPID INCREASE IN LOCAL WAGES AND SALARIES AND STABLE WORLD COMMODITY PRICES. HOWEVER, THE RECENT SOFTENING OF THE US DOLLAR AND THE FASTER INCREASE IN DOMESTIC DEMAND COULD RENEW PRESSURE ON PRICES IN DUE COURSE. MOREOVER, HOUSING RENTALS ARE LIKELY TO RISE FURTHER FOLLOWING THE UPSURGE IN RESIDENTIAL PROPERTY PRICES OVER THE COURSE OF THIS YEAR. FOR THE YEAR AS A WHOLE, THE RATE OF INCREASE IN THE CPI(A) IS EXPECTED TO AVERAGE 12 PER CENT (THIS FIGURE WILL ONLY BE RELEASED PUBLICLY ON 22 NOVEMBER).

FORD

YYYY

ΜΑΙΝ

26

LIMITED

HKD

FED

NNNN

DISTRIBUTION

26

ERD

MR BURNS

PAGE

2

CONFIDENTIAL

Page 180Page 181