UK inflation climbs to 1.5pc

Wednesday, November 18, 2009
LONDON: British 12-month inflation rose to 1.5 per cent in October, pushed by fuel prices and accelerating for the first time for eight months in line with market expectations, official data showed on Tuesday.

“Consumer Prices Index (CPI) annual inflation, the government’s target measure, was 1.5 per cent in October, up from 1.1 per cent in September,” the ONS said in a statement. “By far the largest upward pressure affecting the change in the CPI annual rate came from transport. The largest upward effect within transport came from fuels and lubricants,” it added.

The ONS also said CPI inflation increased by 0.2 per cent in October compared with September on a monthly basis. Market expectations had been for a monthly gain of 0.1 per cent. Petrol prices meanwhile slipped in October, but the fall was far less than the slump recorded last year, and added to inflationary pressures. Other contributing factors included rising prices for air fares, food and second-hand cars, according to the ONS.

Last week, the Bank of England (BoE) had forecast a sharp spike in British inflation before the end of 2009, adding that it was likely to fall back to about one per cent in late 2010. The BoE’s chief task is to keep 12-month CPI inflation close to a 2.0-per cent target.

Capital Economics analyst Jonathan Loynes said that inflation was now on an upward trend. “October’s UK consumer prices figures mark the start of an upward trend in headline inflation over the next few months, but underlying price pressures should remain weak,” Loynes said. “The rise in headline inflation ... was a bit sharper than we had expected, thanks (partly) to an unanticipated rise in food inflation,” he added.