Markets

Food and transport costs help push inflation to five-year high

Food and transport costs help push inflation to five-year high

Inflation in Britain rose at the fastest pace in over five years in September, remaining above the Bank of England's 2% target for the seventh consecutive month, after breaking through the threshold for the first time in three years in March.

The UK consumer prices index was 3.0% higher in September than a year ago, in line with economists' forecasts after hitting 2.9% the month before.

The Bank base rate has been set at a new all-time low of 0.25% since August past year when the Bank slashed the rate in response to the shock Brexit vote.

"Today's release has all but rubber-stamped a rate hike from the central bank at their next meeting", said David Cheetham, chief market analyst at online trading firm XTB.

Indeed, the MPC had signalled in the minutes of its September meeting that a rise above 3% by October looked likely, so this won't have come as a huge surprise, said Paul Hollingsworth at Capital Economics, though he does think there will be a rate rise in November.

One of the main reasons why inflation has spiked over the past year is related to the pound's sharp fall since the country voted to leave the European Union in June 2016.

Core inflation that excludes energy, food, alcoholic beverages and tobacco, held steady at 2.7 percent.

Meanwhile, monthly input price inflation eased notably to 0.4 percent from 2.3 percent.

Following a series of relatively hawkish comments by governor Mark Carney and other members of the monetary policy committee, the Bank of England is poised to raise interest rates for the first time since the financial crisis next month.




The Consumer Prices Index (CPI) measure of inflation rose from 2.9% in August thanks partly to higher food prices.

Fuel prices are also expected to lift CPI - after Hurricane Harvey disrupted United States oil production - adding to pressure from a 12.5% electricity price hike by British Gas that took effect from mid-September.

Another report from ONS showed that output price inflation slowed slightly to 3.3 percent, as expected, from 3.4 percent in August.

For now, inflation sits comfortably in line with the Reserve Bank's target.

INTEREST-STARVED savers have been hit with more bad news after inflation hit a five-year high.

Households have been feeling the pinch as the Brexit-hit pound bumps up everyday prices and wage growth tracks behind inflation.

"The Chancellor must use November's Budget to ease the pressure on hard-pressed families".

The International Monetary Fund, which cut its forecast for United Kingdom growth this summer, recently raised the the growth outlook for every advanced economy aside from Britain amid Brexit uncertainties, raising further fears over domestic performance.


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