U.K. CPI Rose to a Four-Month High

U.K. inflation rate surprisingly rose in October above the Bank of England's 2 percent target to a four-month high, suggesting higher interest rates have yet to press price pressures out of the economy.

The main upward pressure came from changes in the price of road fuel. Petrol pump prices rose by 2.7 pence per litre in October, in large part reflecting the increase in fuel duty that came into effect on the first of the month. Last year, by contrast, petrol prices fell by 5.2 pence per litre. There was also a large upward contribution from air travel. Air fares to European destinations bucked the usual seasonal pattern by rising this October, whereas they fell a year ago.

A further large upward effect came from food. In particular from meat, where there were strong recoveries in the price of bacon, and from fruit, particularly from increases in the price of strawberries and bananas. Smaller upward contributions came from changes in the price of biscuits and cakes, and from eggs.

The largest downward contribution to the change in the CPI annual rate came from gas and electricity bills which both fell slightly this year as a result of the continued phasing in of tariff reductions. Over the same period last year, average gas and electricity bills rose.

RPI inflation rose to 4.2 per cent in October, up from 3.9 per cent in September. The main factors influencing the RPI were similar to those affecting the CPI. RPIX inflation – the all items RPI excluding mortgage interest payments – was 3.1 per cent in October, up from 2.8 per cent in September.

As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate in September, at 1.8 per cent, was below the provisional figure for the European Union as a whole of 2.2 per cent.

U.K. CPI Rose to a Four-Month High

TradingEconomics.com, Office for National Statistics
11/13/2007 6:55:23 AM