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British inflation defies forecast to stay steady
By David Milliken and Christina Fincher |
September 15, 2010, Wednesday
|
Print Edition
Print Edition
BRITISH inflation defied expectations of a fall in August and held steady at the level that last month forced the Bank of England to write a public letter to explain why prices are rising so fast.
The Office for National Statistics said the annual CPI rate remained at 3.1 percent, more than a percentage point above the two percent target after big rises in airfares and clothing prices offset easing fuel costs.
Analysts had predicted a drop to 2.9 percent but inflation has repeatedly surprised on the upside, a dilemma for BoE policymakers who are still worried about growth as the economy recovers from the worst recession since World War II.
"Overall inflation is stubbornly high," said Philip Shaw of Investec.
One BoE policymaker has been calling for interest rates to rise from their record low of 0.5 percent to counter inflation but the central bank is, for now, leaving the door open to expanding its 200 billion pound (US$308.11 billion) asset-buying program to boost the economy.
The economy grew by 1.2 percent in the second quarter but most analysts are worried that planned fiscal tightening could hit growth next year.
House prices are falling again despite record low interest rates. A survey by the Royal Institution of Chartered Surveyors showed them dropping at their fastest rate since May 2009.
The core rate of inflation, which excludes food and energy costs, rose to 2.8 percent from July's 2.6 percent.
The Office for National Statistics said the annual CPI rate remained at 3.1 percent, more than a percentage point above the two percent target after big rises in airfares and clothing prices offset easing fuel costs.
Analysts had predicted a drop to 2.9 percent but inflation has repeatedly surprised on the upside, a dilemma for BoE policymakers who are still worried about growth as the economy recovers from the worst recession since World War II.
"Overall inflation is stubbornly high," said Philip Shaw of Investec.
One BoE policymaker has been calling for interest rates to rise from their record low of 0.5 percent to counter inflation but the central bank is, for now, leaving the door open to expanding its 200 billion pound (US$308.11 billion) asset-buying program to boost the economy.
The economy grew by 1.2 percent in the second quarter but most analysts are worried that planned fiscal tightening could hit growth next year.
House prices are falling again despite record low interest rates. A survey by the Royal Institution of Chartered Surveyors showed them dropping at their fastest rate since May 2009.
The core rate of inflation, which excludes food and energy costs, rose to 2.8 percent from July's 2.6 percent.
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