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Food and energy bill rises keep inflation at 2.7%
Despite falling fuel prices, the UK consumer prices index remains stubbornly above target.
Rising food prices and energy bill hikes kept the inflation rate on hold at 2.7% in November, according to official data published today, maintaining the pressure on struggling British consumers.
Despite falling fuel prices, consumer price inflation (CPI), the government’s preferred measure, remained at an annual rate of 2.7%, while the retail prices index (RPI) fell from 3.2% to 3%, according to figures from the Office for National Statistics.
The data follows last month’s shock CPI rise to a five-month high of 2.7% as the trebling in university fees and rising food prices forced up the cost of living. Inflation had been falling since hitting a three year high of 5.2% in September 2011.
Although today's figure defies economists' consensus forecast for a slight fall in annual inflation in November, inflation is expected to rise towards 3% next year, pushed up by higher food prices and energy bill hikes.
'The overshoot of the inflation target persists and price 'stickiness' remains evident in the data,' commented RBS economist Ross Walker. 'Further utility price rises will keep inflation rather elevated into the early part of 2013,' he added.
UK CPI 12-month percentage change
Today’s data comes amid growing concern that the UK faces a ‘triple dip' into economic contraction in the current quarter, following on from the 1% GDP growth in the third quarter.
Bank of England governor Mervyn King is among the doomsayers, warning last month that output would ‘fall back sharply’ this quarter.
Nonetheless, the Bank earlier this month voted against re-booting its multi-billion pound stimulus programme.
So far the Bank has pumped £375 billion of new money in to the economy in the past three years, while keeping interest rates at a record low of 0.5%.
The Bank has been criticised for failing to keep inflation below its target, with King recently admitting for the first time that more leeway is needed to let the inflation rate drift away from 2.0% in order to take action to avert financial crises.
The debate over the trade-off between economic growth and inflation has been fuelled by well-publicised comments from incoming Bank of England governor Mark Carney that central banks should consider scrapping their inflation targets and replace them with a target for economic growth.
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- Inflation set to hit 3% after shock increase in October
- Bank of England unmoved by ‘triple dip’ threat
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- Inflation still King’s priority, but with breathing space
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