Published On: Tue, Nov 14th, 2017

Inflation set to soar: Mark Carney must explain why cost of living is rising so rapidly

The Consumer Price Index (CPI) measure of inflation is predicted to hit 3.1 per cent in October when official figures are released on Tuesday.

It would see CPI surge beyond the 3 per cent rate recorded in September to its highest level since March 2012 when it pushed to 3.5 per cent.

Such a move would force Dr Carney to write a letter to Chancellor Philip Hammond explaining why inflation is so high.

The Government has set an inflation target of 2 per cent, with protocol dictating that the Bank must contact Mr Hammond if inflation exceeds 3 per cent or falls short of 1 per cent. 

Upward pressure on the cost of living is expected to come from rising food and energy prices, with the Brexit-hit pound also remaining a key driver.

Surging inflation has put UK consumers under a sustained squeeze, with CPI outstripping wage growth and forcing households to take on debt or raid their savings to keep spending.

Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, said: “The contribution of electricity prices to inflation likely increased by 0.05 percentage points in October.

“British Gas raised its standard tariff by 12.5 per cent on September 15. 

The ONS collected its data on September 13, so the price hike will appear for the first time in the official data in October.

“In addition, food CPI inflation likely rose to about 3.4 per cent in October, from 3.0 per cent in September, increasing its contribution to the headline rate by 0.04 percentage points.”

Economists are predicting a drop in fuel costs to provide some downward pressure, with the lion’s share of Brent crude’s rise beyond 60 a barrel coming in November.

Alan Clarke, Scotiabank’s head of European Fixed Income Strategy, said: “Lower petrol prices (and base effects) will bear down on inflation, while higher airfares inflation will provide an offset. “More specifically, petrol prices fell by 0.4 per cent m/m this October, compared to a 2.3 per cent m/m rise a year ago. 

“That base effect represents a drag on headline inflation of close to 10 basis points.”

The update comes after the Bank hiked interest rates from 0.25 per cent to 0.5 per cent for the first time in more than 10 years earlier this month.

It was sparked by the Bank’s need to dampen CPI, which it predicts will now peak at around 3.2 per cent this Autumn. 

Celebrity Funny Gaming
Health Food-Recipes Books
Sports Lifestyle Music
Movies Business World
Fashion Top Stories Travel
Technology Education

buzzfix TODAY


Most Popular Posts