UK Oct annual CPI inflation 2.1 pct, above BoE target for first time since June

UK Oct annual CPI inflation 2.1 pct, above BoE target for first time since June

	Published : Tue, 13 Nov 2007 10:22 By : Agencies Print this Story

LONDON (Thomson Financial) - UK inflation rose back above the Bank of England's 2.0 pct target level in October for the first time since June, pushed up by increases in petrol and fuel prices, official figures showed.

The Office for National Statistics said the annual CPI inflation rate

rose to 2.1 pct in October from 1.8 pct in September.

Analysts had expected a much smaller rise in the annual rate to 1.9 pct.

The increase in inflation will help cement views that, although the Bank of England's next move is expected to be an interest rate cut, this will not happen until at least next year.

The central bank is charged with targeting annual CPI inflation at 2.0 pct on a two-year horizon.

The ONS said that the largest upward effects on the CPI rate in October came from transport costs, where the annual rate jumped to 5.1 pct from 2.7 pct in September, as well as fuel and food prices.

Petrol pump prices rose by 2.7 pence per litre during October, largely reflecting the increase in fuel duty that came into effect on October 1, compared with a fall of 5.2 pence per litre a year ago. There was also a large upward contribution from increases in air fares.

Food prices rose by 4.7 pct year-on-year, up from 3.7 pct the previous month, mainly due to higher prices of meat and fruit, with smaller upward contributions from bread and cereals.

These were partially offset, however, by downward effects from housing and household services, with gas and electricity bills both falling slightly. Smaller downward effects also came from communication, clothing and footwear, alcoholic beverages and tobacco and restaurants and hotels, the figures showed.

On a month-on-month basis, October CPI inflation was up 0.5 pct, above analyst expectations for a 0.3 pct rise and following a small 0.1 pct gain in September.

Excluding energy and food, however, inflation remains relatively subdued.

The underlying, or 'core' measure of CPI -- which excludes energy, food, alcoholic beverages and tobacco -- remained at an annual rate of 1.5 pct, well below forecasts for a rise to 1.7 pct. The last time the core rate was below 1.5 pct was in October 2006.

Elsewhere in today's release, the statistics office said the annual RPI rate of inflation, which is used in pensions payments and pay negotiations, jumped to 4.2 pct from September's 3.9 pct rate.

This is the highest RPI rate since June and slightly above expectations for a 4.1 pct increase. As with the CPI rate, this was largely due to rises in petrol and food prices.

On a monthly basis, RPI inflation was up 0.4 pct after September's 0.3 pct rise and against forecasts for another 0.3 pct rise.

Meanwhile, the annual RPIX measure, which excludes mortgage payments, was

3.1 pct, against a 2.8 pct rate in September and above forecasts for a reading of around 3.0 pct.

The annual RPIX measure is well above the 2.5 pct annual rate that the BoE was previously charged with targeting and has been above that level since May 2006.

Month-on-month, RPIX was up 0.4 pct, above expectations for a 0.3 pct gain.

jessica.mortimer@thomson.com

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