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Inflation hits 25-month high

inflation, shopping

Consumer price inflation has exceeded forecasts by hitting 1.2 per cent in November, a 25-month high.

The increase follows a slight dip to 0.9 per cent in October.

Clothes, IT equipment, furniture, fuel and food helped push the monthly figure up.

Strong increases in oil prices in December following last month’s Opec agreement are set to add further pressure on the next monthly figures.

Brent oil hit $57.89 a barrel yesterday after some non-Opec producers agreed to join the cut to production.

IHS Markit predicts inflation will hit 2 per cent in the first quarter next year, rising to 3 per cent later in the year before hitting 3.3 per cent in early 2018.

Chief economist for the UK and Europe Howard Archer predicts inflation will move above earnings growth in 2017.

He says: “It looks inevitable that consumer purchasing power will deteriorate markedly over the coming months as inflation moves appreciably higher and earnings growth is limited.”

Archer expects the Bank of England to take inflation in its stride and keep rates at 0.25 per cent due to the uncertain outlook for the UK economy. 

“The Monetary Policy Committee moved from an easing bias to a neutral stance a its November meeting reflecting higher inflation expectations resulting from sterling’s weakness but also appreciable concerns over the medium-term UK growth outlook.”

Archer says rates could remain at their current record lows until 2020, but does not expect the Bank to extend quantitative easing or corporate bond buying.


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