UK annual inflation reahced 3.7 percent
Wed, 19 Jan 2011 11:34:58 GMT
The annual inflation rate in the UK has hit its record at 3.7 percent in December, a 0.4 percent increase from November, according to the recent data gathered.
Of inflation drivers, the higher prices of fuel, food and air fares could be named. The Office for National Statistics (ONS) confirmed that the Consumer Price Index (CPI) inflation increased by 1.0 percent in the last month, which is the first time England faces a month-on-month price increase since 1996.
The analysts have predicted that the country is to face another rise of 0.7 percent in a short period of time, which would put pressure on the Bank of England (BoE). Consequently, BoE may increase its record low interest rates.
The current inflation rate is not what market had expected - 3.4 percent year on year --.
Although there is a fear of inflationary pressures, it is decided that the interest rate should be held at 0.50 percent for a 22nd month in a row, according to the BoE's monetary policy committee (MPC).
Joost Beaumont, ABN Amro economist, said: "Overall, this report should add to MPC members' inflation worries, making them less comfortable with the current wait-and-see stance … We think that the MPC will shift into tightening mode in the coming months."
After increasing of the Value Added Tax (VAT) by the government, the inflation is expected to increase more in early February. The inflation is to hit goods and services hard.
The head of the UK trading desk at Travelex Mark Bolsom said: "It will heap pressure on the Bank of England to raise interest rates. Unfortunately, an interest rate rise will come as a blow to consumers who have less disposable income."
The main duty of the central bank is to keep the annual inflation rate 2.0 percent in order to preserve the value of money.