Friday, January 14, 2011

Inflation Jumps in The U.K., Calling for Raise in Interest Rates

Rising prices for those commodities priced in the dropping U.S. dollar, namely oil and food, helped overall input prices surge 3.4% in just a month, "more than double the 1.5% rise expected".

From the Telegraph: "The rise helped pushed the yearly rate of increase to 12.5%...".

"As margins come under increasing pressure, manufacturers are passing price rises on to their clients, although competitive pressures are shielding customers somewhat.

“Firms will feel pressure to pass further cost increases on in coming months, especially as there seems to have been no let up in the rising price of many commodities in recent weeks,” said Chris Williamson, chief economist at researcher Markit.

Calls to Increase Interest rates

"These data will therefore add to calls on the Bank of England to raise interest rates to cool inflationary pressures."

The official rate of inflation, as measured on the consumer price index (CPI), was 3.3pc in November and economists expect the rate to have moved even further away from the 2pc target in December.

Philip Shaw at Investec thinks the updated figures out next week will show that annual inflation rose to 3.5pc last month, driven by the rising cost of energy.

David Kern, chief economist at the British Chambers of Commerce (BCC), said: “These figures … reinforce our expectations that during the next few months annual consumer price inflation will rise towards 4pc per cent and possibly higher.

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