Inflation balloons to its highest level in more than two years

Posted by Ben Tumilty in Personal Finance on 15 December 2016 - Ben is a Credit Analyst at checkmyfile

The rate of inflation in the UK swelled to 1.2% in November – the biggest increase since October 2014. This is on the back of a massive rise in clothing prices, according to the Office for National Statistics (ONS).

The figure is up from 0.9% in October of this year, and 1.3% in October 2014, confirmed in November’s Consumer Price Index (CPI). The rise can be mainly put down to the price of clothing, currently at a 6-year high – but the increasing cost of fuel in recent times, with oil back up to $50 a barrel, cannot be ignored.

Last month the Bank of England forecast that inflation would get up to 2.8% by the middle of 2018, as the drop in the value of the pound is expected to impact on the cost of imports and the general cost of living.

Howard Archer from IHS Global Insight said that the rise to 1.2% was “at the top end of expectations, and confirmed the widespread perception that the dip in inflation to 0.9% in October from 1.0% in September was only a brief respite.”

Archer continues, “We expect consumer price inflation to trend markedly higher over the coming months as sterling weakness increasingly feeds through. December’s jump in oil prices to an 18-month high will also impact. Specifically, we see inflation reaching its 2.0% target rate during the first quarter of 2017, then rising to 3% in the latter months of next year and peaking around 3.3% early on in 2018.”In similar news, the Bank of England’s Monetary Policy Committee is likely to stop interest rates drifting any higher, keeping them pinned at 0.25%.

This may deflate some prospective savers, as lenders still look to cut rates on savings accounts, and as the ONS says consumers are paying 7.4% more for fuel than this time last year, it is not just those looking to put funds away that will feel let down by today’s news.

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