§ We are on course to get underlying inflation down to our target of 2½ per cent. or less, and to keep it there. In October underlying inflation rose to just over 3 per cent. This should not have surprised anybody who looked at last year's statistics. It is a temporary and inevitable reflection of the exceptional falls in the price level 12 months before.
Let me give the House my concrete reasons for being so confident about low inflation. Apart from oil prices, which have risen sharply, commodity prices are steady and are not putting upward pressure on inflation. Earnings growth remains sensible and modest. Producer price inflation—a good indicator of what is in the pipeline for retail price inflation—is at it lowest levels in this country since the 1960s. Producer input prices are actually lower than they were a year ago.
Any risk to this recovery from inflationary pressures re-emerging remains a good way off. But as I have demonstrated again and again, when I see any risks, I will act. I will continue to stay ahead of the game on monetary policy. Eddie will keep me steady and I intend to continue to be canny.
I expect underlying inflation to meet our target of 2½ per cent. or less. I will ensure that we go on meeting that target for the foreseeable future.