Inflation bites in the United Kingdom as households come under price pressure

Inflation bites in the United Kingdom as households come under price pressure”

The consumer prices index increased to 3 per cent in September, up from August's 2.9 per cent and the highest reading since 2012, according to the Office for National Statistics.

The base rate has been at 0.25 per cent since past year, but policymakers have said that if the economy continues on the same path, rates will soon need to rise.

'Consumer spending remains remarkably resilient in the face of inflationary pressures and weak wage growth, but the current squeeze on household budgets is a slow burner, as it takes some time for economic reality to hit home, ' said Laith Khalaf, senior analyst at Hargreaves Lansdown. A higher base rate could help keep inflation down - and Bank of England governor Mark Carney has already hinted a rise could be on the cards. Much of the increase however has been caused by the fall in the value of the pound since last year's Brexit vote which is likely to be a temporary driver of price increases.

Tilney managing director Jason Hollands says the "age of record low interest rates is coming to an end".

Andrew Montlake, chief executive of Coreco, wrote on Twitter: "3% inflation will definitely serve to spur MPC on to a rate rise in November - will they have the metal to actually follow through?"

But that view is "not necessarily shared by the Bank of England", adds Brittain. This will make it hard for the Bank to make any sustained move to raise rates in the short to medium term, ' said Sweeney.

Dave Ramsden, the new deputy governor of the Bank of England said that he was not in support of voting for an interest rate hike, calling into question when the BoE will implement its first interest rate hike in over ten years.

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