“Consensus forecasts had pointed to a smaller increase to 1.4%. This is the highest rate since July 2014,” he added. “The main contributors to the acceleration in inflation were motor fuels, air fares, food and clothing – all of which have been affected by the weak pound. Food producers have faced sharply rising input costs, while oil is of course priced in dollars.”
“It is intriguing to hear Bank of England Governor Mark Carney warn of the risks posed by a spike in inflation as today’s price increase data suggests that the UK’s central bank may be getting exactly what it wished for when it cut interest rates and extended its QE bond buying scheme back in August,” said Russ Mould, investment director at AJ Bell. “In theory the Bank of England and the Government should be cheering, since rising inflation helps the former meet its mandate and the latter erode the value of its debts and interest payments to lenders in real terms. Consumers may be less pleased although wage growth is running at 2.5% year-on-year so they are still better off, but there remains a danger that further wallet and purse-busting price hikes are coming down the line.”
