Following the release of the latest Guernsey Quarterly Inflation Bulletin, which showed that Guernsey’s inflation rate dropped to 4.2% at the end of March 2025, Richard Hemans, IoD Guernsey’s lead on economics, commented:
'The latest bulletin shows a similar trend to recent editions, with local inflation slowly declining but still higher than in the UK (3.4%) and Jersey (2.5%). Housing costs remain the main driver. Inflation was 1.6 percentage points lower than in March 2024 and 0.4 points below December 2024.
Housing costs rose by 7.8% year-on-year. Although the pace is slowing, they still contributed around a third of overall inflation. Interestingly, housing costs fell in Jersey, attributed to lower mortgage interest payments. Further investigation would be useful to understand this divergence, given the shared base rate environment — whether differences arise from calculation methods, mortgage structures or market competitiveness. Rental costs are also rising faster in Guernsey.
Household services costs also drove inflation, alongside food and leisure services, while clothing and leisure goods saw mild annual deflation. Encouragingly, four categories experienced deflation over the last quarter, offering hope that inflation will continue to decline.
Core inflation (excluding food and energy) was also 4.2%, suggesting that headline figures are not distorted by volatility. Services inflation rose at an annual rate of 6.1%, while goods inflation was 1.9%. This reflects pressure from housing and household services. Services inflation tends to be stickier, highlighting underlying domestic price pressures, with mortgage interest rates, although determined externally, potentially impacted by local market characteristics.
The States forecast of 4.6% was accurate, and a decline to 3.5% is projected by year-end, indicating that inflation will remain stubborn. For context, the UK is forecasting 2.4% for 2025.
Inflation in Guernsey remains high by historical standards and relative to peers, undermining competitiveness, consumer confidence and fiscal sustainability. Housing remains the critical issue: with population growth and housing shortages, accelerating the delivery of new homes of the right size and quality is essential. Other options to reduce inflation include deficit reduction, productivity improvements, targeted immigration, a review of the mortgage market and promoting greater competition across the economy.
Local inflation is not completely beyond our control.'