United Kingdom Inflation

United Kingdom

United Kingdom: Inflation accelerates in November

December 14, 2010

In November, consumer prices rose 0.4% over the previous month, which was slightly above the reading tallied in October and exceeded market expectations of prices rising 0.3%. The figure was mostly driven by higher prices for food and non-alcoholic beverages as well as for clothing and footwear. As a result of the November price increase, annual inflation inched up to 3.3%, which was the ninth consecutive month that inflation exceeded the 3.0% upper tolerance limit set by the Bank of England (BoE) and prompted the Bank's Governor, Mervyn King, to write a letter, the fourth this year, to the Chancellor of the Exchequer. As in previous letters, King stated that inflation is likely to remain elevated throughout 2011 amid higher commodity prices and the VAT hike scheduled to enter into force in January 2011. At its latest meeting on 9 December, the BoE left the Bank Rate unchanged at 0.50% and maintained the asset purchase facility (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.


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