Inflation hits six-year high at 3.1 per cent

Gladys Abbott
December 12, 2017

United Kingdom inflation accelerated to a more than five year high in November, data from the Office for National Statistics showed Tuesday.

According o the data released by the Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation, this month the Consumer food price index (CFPI) stood at 4.42 per cent compared to 1.90 per cent of October 2017 and 2.03 per cent of November 2016.

The Reserve Bank of India (RBI) has a medium-term target for consumer price index (CPI) inflation of 4 per cent with a range band of 2 per cent either way.

At the same time, input price inflation surged to 7.3 percent on a yearly basis from 4.8 percent a month ago.

The latest reading means Mr Carney is now compelled to write to Chancellor of the Exchequer Philip Hammond explaining why inflation is more than 1 per centage point away from the official 2 per cent target. "It is also likely that inflation will remain above 4 percent y/y until February 2018", added ANZ. "Instead of focusing on the current inflation rate, the most important trigger for higher interest rates will be wage growth, which has so far remained stubbornly anaemic, meaning the attention now shifts to tomorrow's labour market data".

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Upward pressure on inflation last month came from the price of computer games and air fares falling less than they did a year earlier, as well as fuel prices, the ONS said.

However, it is not expected to announce a further increase when it publishes the results of the Monetary Policy Committee's two-day meeting on Thursday.

The pound's sharp decline in the wake of the Brexit vote has pushed up inflation, as it has driven import prices higher, eroding living standards for British workers as wages fail to keep pace.

"It is quite possible that inflation is now close to its peak". Despite the pressure, RBI had refrained from cutting interest rates since the last decrease in August, on account of inflationary trends. Given how dominant services are in the economy, this could feed through to inflation overall. The inflation in the segment was a only 7.47 per cent in October.

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