United Kingdom inflation hits five-year high of 3%


Useful insights can be drawn from the MPC's considerations in its last meeting, wherein the decision to maintain status quo was supported by the need to achieve more clarity in the evolution of key macroeconomic indicators including budget implementation, economic recovery, exchange rate, inflation, and employment generation, specifically between now and the first quarter of 2018.

According to the statistics agency, the inflation growth was stimulated by rising prices for food, recreational goods, and transport costs.

Consumer price inflation in August was 2.9% and rose to 3.0% in September, meaning the squeeze on real incomes remained fierce.

"These effects were partly offset by clothing prices that rose less strongly than this time previous year".

The Government has set an inflation target of 2%, with protocol dictating that Mr Carney must contact the Chancellor if inflation exceeds 3% or falls short of 1%. 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. The rate came in line with expectations.

The Labor Department reported that the consumer price index, or cost of living, increased 0.5% last month, the biggest gain since January.

Meanwhile, monthly input price inflation eased notably to 0.4 percent from 2.3 percent.

Food inflation increased at a faster rate of 20.32% y/y in September, after increasing at a slower rate (20.25%) in August, bringing year-to-date increase in the segment to 16.7% - compared to 13.9% in the same period last year.

"On a month-on-month basis, the Headline index increased by 0.78 per cent in September 2017, 0.19 per cent points lower from the rate of 0.97per cent recorded in August".

"The Urban index rose by 16.18 per cent (year-on-year) in September2017, up by 0.05 per cent point from 16.13 per cent recorded in August and the Rural index increased by 15.81 per cent in September down from 15.91 per cent in August".