Petrol price rises affect the inflation rate

Tue, 18 Oct 2005



Higher petrol prices pushed the rate of inflation to above that in September, but the rise was at a lower rate than expected and calmed some concerns that inflation will accelerate further.

UK Consumer Price Inflation (CPI) rose 0.2 per cent on the month, pushing up the annual rate to 2.5 per cent, up from 2.4 per cent in August, figures from the Office for National Statistics (ONS) show.

The rise in CPI means the figure has now stayed above the government's target of 2 per cent for three months in a row and was lower than the 2.7 per cent that analysts had predicted.

Short sterling interest rate futures rallied on the figures while the pound fell 1/5 cent against the dollar on the perception that inflation may be less of a barrier to a possible Bank of England (BoE) interest rate cut in coming months.

Ross Walker, economist at RBS Financial Markets said, "Some of the concerns out there about CPI hitting 3 per cent at least in the short term look overdone. Unless we get another surge in oil prices, this may well mark the peak. At that margin they make a rate cut slightly easier."

BoE Deputy Governor Rachel Lomax said "I expect inflation to remain above target in the next few months, even if oil prices don't rise further."

The ONS said, "Fuels and lubricants had contributed 0.14 percentage point to the overall rise in CPI. Average petrol prices rose 4.6 pence per litre in September compared with a rise of just 0.1 pence a year earlier."

Downward effects on inflation came from clothing and footwear, particularly women's and children's outerwear, which analysts said chimed with surveys showing retailers still forced to discount prices to lure in shoppers.

"We are seeing relatively subdued increases in clothing, furniture and food prices which imply core inflation pressures remain relatively muted," said Philip Shaw, chief economist at Investec in London.

The figures also offered some relief to those who may have been worried that surging energy costs could lead Britons to demand higher wages.

But annual growth in the Retail Price Index, on which most pay deals are based, eased to 2.7 per cent from 2.8 per cent the month before.
add to favouritesnewsletterlink to this pagesend to friendpost comments

Link to this page

Copy and Paste the following HTML into your page.

 

Advice section: Pros & Cons | Finance Tips | Running Costs | Payment Options
Car finance partners

Halifax Loans