Inflation rises to 1.9% in November

15 December 2009

Higher energy and transport costs led to the rate of inflation increasing during November to just below its official target.

The Consumer Prices Index (CPI) – the official rate of inflation in the UK – hit 1.9% last month from 1.5% in October. The Bank of England's remit is to keep inflation within 100 basis points of 2%.

Higher energy fuel and energy costs this November, compared to last, were the biggest driver behind the rise. Clothing, footwear and energy bill inflation also contributed to the rising cost of living.

Meanwhile, the Retail Prices Index (RPI) – which includes mortgage costs – turned positive in November for the first time since April. This measure of inflation rose from -0.8% in October to hit 0.3% last month.

This is first time the annual inflation rate has increased by more than 1.1% in a month since April 1990 - when the rate increased from 8.1% to 9.4%.

Inflation is expected to rise beyond its 2% target in the new year, partly because the rate of VAT will return to 17.5% on 1 January after more than one year at 15%. Mark Bolsom, head of UK trading desk at Travelex, says the weaker pound and rising oil prices will also help inflation climb as high as 3% “early next year”. 

But both the Bank of England and independent economists forecast that inflation will slow later in the year, probably falling below the 2% target.

Jonathan Loynes, chief European economist at Capital Economics, says the higher rate of inflation expected next year will be “temporary”.

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