United Kingdom Inflation

United Kingdom

Inflation quickens to fastest pace in three years

In September, consumer prices rose 0.6% over the previous month, mirroring an increase of the same magnitude in August. Most of the upward pressure came from rising costs of utility bills as well as increasing prices in the transport category. Annual headline inflation accelerated from 4.5% in August to 5.2% in September, the fastest pace in three years. Market analysts had expected inflation to quicken to a more moderate 4.9%. Inflation in the U.K. remains relatively high by historical standards and well above the Bank of England's target of 2.0%. According to the Bank of England, however, the elevated inflation rate mainly stems from higher global commodity prices and January's VAT rate hike. According to its August Inflation Report, the Bank of England expects inflation to average 4.6% this year before moderating to 3.1% in 2012.


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