In December, consumer prices added one full percentage point over the previous month, which represented the sharpest price increase since 1993 and a record print for the November-December period. Moreover, the spike surprised market analysts, as it came in ahead of the January VAT increase in, and overshot market expectations of a 0.7% increase. The most important drivers behind December's spike were higher prices for transport (+3.6% month-on-month), in particular air transport fares (+41.8% mom). However, higher prices for housing and household services (+1.4% mom) along with higher food prices also contributed to the monthly rise. Owing to the strong price increase, annual inflation stepped up from 3.3% in November to 3.7%, well above the Bank of England's (BoE) 2.0% inflation target and exceeding the 1.0 percentage point tolerance margin. In fact, inflation exceeded the BoE's tolerance limit almost uninterruptedly throughout 2010, prompting the Bank's Governor, Mervyn King, to write four letters to the Chancellor of the Exchequer last year. In the latest letter, the Governor stated that inflation will likely remain elevated throughout 2011 amid higher commodity prices and January's VAT increase. The stronger-than-expected inflation result places additional pressure on the BoE to begin tightening its monetary policy despite the headwinds related to the fiscal consolidation programme. At its meeting on 13 January, the BoE left the Bank Rate unchanged at 0.50% and maintained the size of the asset purchase programme (quantitative easing) at the current GBP 200 billion, in a decision broadly expected by the market. The BoE projects inflation to exceed 3.0% until the second half of 2011.
United Kingdom Inflation
Prices spike ahead of January's VAT increase
January 18, 2011
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United Kingdom Economic News
October 21, 2016
Following nearly four months of little or no news regarding formal negotiations with the European Union, in early October, Prime Minister Theresa May finally shed some light on the Brexit timeline and announced that Article 50 of the Lisbon Treaty will likely be triggered before the end of March 2017.
October 19, 2016
In September, jobless claims increased by 700 from the previous month, according to the Office for National Statistics (ONS).
October 18, 2016
In September, consumer prices increased 0.2% from the previous month, which came in below the 0.3% increase seen in the previous month.
October 8, 2016
In August, industrial production contracted 0.4% over the previous month in seasonally-adjusted terms, which contrasted the 0.1% increase recorded in July.
October 3, 2016
In September, the manufacturing sector recovered the ground it had lost after the EU referendum.