British inflation higher than forecast
By Christina Fincher |
July 14, 2010, Wednesday
|
Print Edition
Print Edition
FALLING petrol prices pushed British inflation down for a second month running in June, but underlying pressures rose and inflation over the quarter was higher than the Bank of England's latest forecast.
The Office for National Statistics said yesterday annual consumer price inflation fell to 3.2 percent from May's 3.4 percent after prices rose 0.1 percent on the month, as economists expected.
However, the older retail price measure of inflation fell less than expected as core CPI inflation - which excludes energy and food prices - unexpectedly rose.
"The obvious surprise was the rise in the core rate, which serves to underline this theme of price stickiness," said Ross Walker, UK economist at RBS. "Clearly it's not falling as much as we'd hoped and it's not making the BoE's job any easier."
During the second quarter, headline consumer price inflation averaged 3.5 percent, above the 3.3 percent predicted by the central bank in its May Inflation Report.
Gilts fell and sterling rose as investors sensed more BoE policy makers may be persuaded to join rate-rise advocate Andrew Sentance if underlying inflation does not resume a downward path.
Consumer price inflation hit a 17-month high of 3.7 percent in April, prompting concern that slack in the economy was failing to bear down on inflation to the degree expected.
BoE Governor Mervyn King remains convinced inflation will ease back towards its 2 percent target over the course of the year once past rises in oil prices and January's VAT rise fall out of the annual comparison, but recent BoE policy meetings have seen heated debates.
A breakdown of the figures showed weaker transport costs, notably a reduction in petrol prices, knocked 0.17 percentage points off the annual rate of CPI. A record June monthly fall in clothing prices also helped reduce annual CPI by 0.05 percentage points.
However, insurance premiums and airfares rose and core CPI inflation rose to 3.1 percent from 2.9 percent, its joint highest rate since records began in 1997.
The Office for National Statistics said yesterday annual consumer price inflation fell to 3.2 percent from May's 3.4 percent after prices rose 0.1 percent on the month, as economists expected.
However, the older retail price measure of inflation fell less than expected as core CPI inflation - which excludes energy and food prices - unexpectedly rose.
"The obvious surprise was the rise in the core rate, which serves to underline this theme of price stickiness," said Ross Walker, UK economist at RBS. "Clearly it's not falling as much as we'd hoped and it's not making the BoE's job any easier."
During the second quarter, headline consumer price inflation averaged 3.5 percent, above the 3.3 percent predicted by the central bank in its May Inflation Report.
Gilts fell and sterling rose as investors sensed more BoE policy makers may be persuaded to join rate-rise advocate Andrew Sentance if underlying inflation does not resume a downward path.
Consumer price inflation hit a 17-month high of 3.7 percent in April, prompting concern that slack in the economy was failing to bear down on inflation to the degree expected.
BoE Governor Mervyn King remains convinced inflation will ease back towards its 2 percent target over the course of the year once past rises in oil prices and January's VAT rise fall out of the annual comparison, but recent BoE policy meetings have seen heated debates.
A breakdown of the figures showed weaker transport costs, notably a reduction in petrol prices, knocked 0.17 percentage points off the annual rate of CPI. A record June monthly fall in clothing prices also helped reduce annual CPI by 0.05 percentage points.
However, insurance premiums and airfares rose and core CPI inflation rose to 3.1 percent from 2.9 percent, its joint highest rate since records began in 1997.
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