U.K. Inflation Accelerates

U.K. inflation rose more than economists forecast in November to the fastest pace in six months, driven by fuel and transport costs.

Consumer prices increased 1.9 percent from a year earlier, compared with a 1.5 percent gain the previous month, the Office for National Statistics said today in London. On the month, prices rose 0.3 percent.

The inflation rate will rise next year to about 3 percent, close to the upper limit of the government target, before dropping again, finance minister Alistair Darling said last week. The Bank of England has kept up spending on its 200 billion-pound ($326 billion) bond plan as it tries to get the rate to the 2 percent goal in the medium term and stave off the threat of deflation.

The inflation rate increased because of higher costs of fuels and lubricants, which rose 2.8 percent on the month, the statistics office said. Higher prices of second-hand cars and air transport also led the gain.

Those gains offset slower cost increases of food and non- alcoholic beverages, the statistics office said. Tesco Plc, the world’s No. 3 retailer, posted slowing sales growth this month that missed analysts’ estimates as food price inflation cooled.

Core inflation, which excludes costs of energy, food, alcohol and tobacco, accelerated to 1.9 percent in November, the fastest pace in a year, the statistics office said.

The Bank of England said on Nov. 11 that inflation will accelerate further before slowing below the 2 percent target. It then won’t return to the goal until 2012, the predictions show.

The retail price index, a cost-of-living measure used in wage bargaining, rose by 0.3 percent from a year earlier, compared with a 0.8 percent drop in October. The 1.1 percentage point increase in the rate was the biggest since 1990.

Bank of England policy makers kept their bond plan at 200 billion pounds for a second month last week, and also maintained the benchmark interest rate at a record low of 0.5 percent. The next decision is on Jan. 7.

U.K. Inflation Accelerates

TradingEconomics.com, Bloomberg
12/15/2009 9:43:43 AM