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Inflation Rate Up in November

 

The UK Consumer Prices Index measure of inflation rose to 3.3% in November, up from 3.2% in October, figures from the Office for National Statistics (ONS) show.  The increase was driven by a record rise in food, clothing and furniture prices, according to the ONS.  The CPI measure remains above the government target of 2%. 

The Retail Prices Index measure of inflation - which includes mortgage interest payments - rose to 4.7% from 4.5%.

The figures underline concerns among many economists that inflationary pressures are greater than analysts believed until recently.  Earlier in 2010 it was expected that spare capacity within the economy would counter-act in built inflationary pressures stemming from reduced access to finance, higher input costs and a weak Pound.  It is debateable to what extent spare capacity will balance inflationary pressures which are expected to grow in the near term, in particular when VAT goes up from 17.5% to 20% in January 2011.

Despite widespread concerns regarding rising inflation there are still a number of indicators that point to depressed demand and deflation being the greater threats to economic growth moving forward – not least of all as households, businesses and the public sector continue to rein in spending.  It is therefore understandable that the Bank of England is seeking to stimulate spending with ultra loose monetary policy, and should continue to do so for the foreseeable future.  

To give your view, please leave a comment on this blog, or email mark.stephenson@necc.co.uk