You are here: Home - Saving & Banking - News -

Inflation climbs back to 2.9%

0
Written by: Paloma Kubiak
12/09/2017
Inflation hit 2.9% in August, matching May’s four-year high, according to official statistics.

The Consumer Price Index (CPI) rose from 2.6% in the previous month, the Office for National Statistics has confirmed.

The main contributors to the uptick in prices were the rising costs of clothing and petrol. The holiday season also saw a rise in air fares.

UK consumer price inflation including owner occupiers’ housing costs (CPIH) came in at 2.7% in August, up from 2.6% in July.

With the inflation rate far out-pacing the growth in wages, economists suggest now may be the time for the Bank of England to raise interest rates.

Maike Currie, investment director for personal investing at Fidelity International, said: “Whether or not the Bank talks tough, there is little sign that markets are ready to buy it. In fact the difference in outlook between the bank and investors is becoming pronounced – despite the Bank’s repeated warnings about needing to raise rates sooner and faster than markets expect, markets are pricing in that they will stay at their current 0.25% level until the end of 2018, and not rise above 0.5% until 2021.”

Currie added that fleeting inflation and tepid economic growth means the Bank of England is unlikely to turn off the taps of monetary stimulus too quickly.

“Despite the hawkish crows, the doves should continue to rule the roost. That’s good news for borrowers, bad news for those leaving their money languishing in cash.”

Ben Brettell, senior economist at Hargreaves Lansdown, said it looks likely inflation will fall back in the coming months, as the effect of Brexit-induced sterling weakness falls out of the year-on-year calculation.

“Indeed it’s possible that 2.9% will be the highest we see in the current cycle. Mark Carney will certainly be hoping so, as it will save him the trouble of writing to the chancellor to explain himself.

Brettell added that beyond the currency effect there appear to be few underlying inflationary pressures.

“Labour costs are the main factor in domestic inflation, and growth here remains below long-term averages. Furthermore we need to consider demographics. The baby boomers are retiring in their droves. They have already gone through their consumption phase – they have bought their houses, cars and consumer goods. The generation behind them is saddled with debt and struggling to get on the housing ladder.

“All in all I see more deflationary forces than inflationary in the world economy at present.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Which ISA is right for you? A round up of the six products available in 2017

From cash to innovative finance to lifetime, here's our guide to the ISA products available to savers this yea...

Guide to buy-to-let tax changes

In late 2015, former Chancellor George Osborne announced a range of  tax measures aimed at landlords, which t...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Five fund tips for a 0.25% interest rate environment

With interest rates stuck at a record low 0.25% and expectations rates could fall to close to zero, here are ...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

Read previous post:
remortgagor
How to remortgage

When your mortgage deal comes to an end, you may want to shop around for a new product. This is...

Close