Inflation hits six-year high at 3.1 per cent

Robyn Ryan
December 12, 2017

Sterling got only a temporary boost on Tuesday from data showing British inflation unexpectedly almost hit a six-year high in November, with investors betting it would have little effect on how soon the Bank of England would raise interest rates again.

Consumer price index-based inflation was 3.63 per cent in October 2016, data released by the Central Statistics Office (CSO) showed.

United Kingdom consumer price inflation has risen so high that Bank of England governor Mark Carney will have to write a letter to the Chancellor explaining why and what he intends to do about it.

Because inflation is more than a percentage point above the bank's 2 percent target, Carney has to explain to Chancellor of the Exchequer Philip Hammond what he and his colleagues on the rate-setting Monetary Policy Committee are doing about getting inflation down.

"The market had geared up for an above-3-percent inflation reading today anyway - if you look at the spread of top-rated economists, about half of them were looking for 3.1 percent", said Nomura currency strategist Jordan Rochester.

Rising prices for a range of recreational and cultural goods and services, most notably computer games, also had an upward effect.

Economists believe inflation should be at its peak now, though price rises may only decline slowly in the coming months. The Bank of England has a tricky tightrope to walk.

"We at Assocham expect that domestic conditions for growth will improve gradually, mainly driven by consumption demand, which is expected to strengthen with implementation of the Seventh Pay Commission and government stimulus package to revive the economy", he added.

"Price developments will be decisive in determining whether and if so how soon the Bank of England will hike interest rates again", Commerzbank wrote in a morning note.

While the recent rise in oil prices has pushed up firms' costs, he pointed out that this is still much lower than the close to 20% rates seen in early 2017.

In October, inflation rate for the food basket had increased to 1.9 per cent from levels of 1.25 per cent in September.

Other reports by VideoGamingPros

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