Inflation Stays The Same

On Tuesday the Office of National Statistics announced that the annual rate of inflation for November was 2.1%, staying the same as in October. This came as a great relief to the City as economists had been predicting a rise to 2.2%.

Petrol costs have broken the £1 a litre barrier and food prices – especially for products such as bread and cakes – have risen at an alarming rate, but the good news will have been greeted by much relief by the Bank of England who, while desperate to keep inflation under control, had to reduce the loan base rate in early December by a quarter of a percent to give a boost to an economy that was looking increasingly sickly.

The soaring price of oil – getting close to $100 a barrel – has put 3.5p a litre on the price of petrol and, together with overall annual food inflation rate going up to its highest for 14 years, was expected to push inflation to higher levels. However, a fall in the price of vegetables – which had risen in the previous year – was enough to offset the rise of items such as milk, cheese and bread in November, according to the ONS.

Twelve months ago the price of gas and electricity was on the rise, but earlier this year prices came down and recently these have been more stable. European air prices are also lower now than a year ago, thanks to some price cuts in certain areas.

The retail prices index (RPI), which includes mortgages payments in its calculations, was slightly up in November – by 0.1%, to 4.3%.

Chief European economist at Capital Economics Jonathan Loynes, said: “November’s figures confirm that the UK is suffering relatively lightly from the latest rise in oil and energy prices. There are still worries over rising cost pressures and the high levels of inflation expectations amongst both households and firms. But with growing signs that activity is slowing, it seems likely that these concerns will fade in time.”

This entry was posted on Thursday, January 10th, 2008 at 12:43 pm and is filed under Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.