Tuesday, Oct 14, 2008
Inflation unexpectedly soared to 5.2% last month, the highest in 16 years, after power companies hiked gas and electricity bills.
The annual rate in the consumer prices index (CPI) was up from 4.7% in August and the highest since the series began in January 1997, official figures showed today. Economists had expected inflation to hit 5%. The figures are expected to mark the peak in the spiralling cost of living seen this year.
The main reason inflation topped 5% for the first time were sharp rises in utility bills. Electricity prices were 30.3% higher on a year ago while gas prices soared by 49.9%. The annual rate of inflation for energy and other household bills hit 15%, the highest since January 1989.
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However, food inflation, another key source of price pressures this year, slowed for the first time since March as dairy prices fell. The annual rate dropped to 12.7% from 14.5%.
David Page, economist at Investec, said: “The power company hikes have pushed inflation above 5%, as we expected. However, we see this as the peak in inflation and retreats in energy prices should see inflation fall back relatively sharply over the next year.”
The Bank of England said last week when it joined in the emergency global interest rate cut that although inflation could soon rise above 5%, the turmoil in financial markets had increased the downside risks to the economy and prices. Economists expect more rate cuts in coming months as tumbling oil and food prices feed through to inflation and the economy slides into recession.
This article was posted: Tuesday, October 14, 2008 at 3:49 am