UK Inflation Rises 3.2% in October


Higher fuel prices, more expensive computer games and increasing bank charges pushed inflation higher in the United Kingdom in October, according to the Office for National Statistics.

The rise in consumer price inflation (CPI) from 3.1 per cent in the year to September to 3.2 per cent in October, was slightly above expectations.

Inflation has remained above the official 2 per cent target for almost a year. The retail price index fell back marginally, from 4.6 to 4.5 per cent, largely due to depressed house prices, which were rising this time last year. These are not included in the CPI.

As inflation remains more than 1 per cent above the target, the Governor of the Bank of England, Mervyn King, has been obliged to write another open letter of explanation to the Chancellor, George Osborne – the ninth such missive since the spring of 2007 and the fourth this year.

In his letter, Mr King repeated his long-held belief that temporary factors such as high commodity prices and the increases in VAT in January (and, prospectively, next January) have kept inflation high. He echoed the view in the Bank's latest Inflation Report, saying that "the chances of inflation being above or below the target in the medium term are evenly balanced".

The Bank's forecasts are for inflation to remain above 3 per cent for the whole of next year, and about 3.5 per cent for much of the earlier part of 2011.

Without the VAT rise, inflation would now be 1.6 per cent.


TradingEconomics.com, The Independent
11/17/2010 7:21:45 AM