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Investment News Inflation Up In October 18471448

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Inflation up in October
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Inflation up in October

16 November 2010 / by Paul Dicken

The government’s target measure on inflation increased slightly in October to 3.2 per cent, according to official statistics.

The persistence of high and now increasing inflation will put  pressure on Bank of England policy makers and add weight to the argument that interest rates should start to be increased. The Bank Rate has been 0.5 per cent for 20 consecutive months as part of monetary policy aiming to stimulate the economy.

The Office for National Statistics said the Consumer Prices Index (CPI) was 3.2 per cent in October up from 3.1 per cent in September, this was attributed to a rise in the cost of fuel, road fuel duty, a lower fall in the costs associated with financial services, increases in toy prices and in the cost of wine, beer and tobacco.

Some prices that make up the index did fall, with downward pressure from the cost of food, in particular the cost of vegetables and meat.

The Retail Prices Index – the alternative measure of inflation – was down from 4.6 to 4.5 per cent for October, while the RPIX which is RPI excluding mortgage interest payments was unchanged at 4.6 per cent.

Publishing its Inflation Report earlier this month the Bank of England said it expected inflation to stay above the 2 per cent target rate throughout 2011, due to the forthcoming rise in VAT and increases in import prices.

The Bank however expects this to fall back as the impact of those factors diminishes and due to the ‘spare capacity’ in the UK economy – a downward pressure on inflation.

The report said they were ‘substantial risks’ to the inflation outlook.

It said: “Continued strong growth in some emerging economies could lead to further upward pressure on the prices of commodities and other imported goods and services, so pushing up companies’ costs.”

© Fair Investment Company Ltd



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