Inflation rockets to five-year high

12 December 2017

Inflation reached 3.1% in the year to November 2017, the highest level recorded for more than five years.

Data published by the Office for National Statistics (ONS) shows that the consumer prices index (CPI) rate of inflation rose to 3.1%, higher than the 3% recorded in October.

This is the highest rate of inflation since March 2012, when it was 3.5%.

High air fares and increasingly expensive cultural goods and services contributed to the high rate of inflation this month, the ONS reported.

As the current rate of inflation is more than 1% away from the Bank of England’s 2% inflation target, governor Mark Carney will be required to write a letter to Chancellor Philip Hammond to explain how he intends to bring inflation back under control.

The Bank of England’s decision to increase the base rate to 0.5% last month is one way the central bank has looked to bring inflation down.

Elsewhere, the consumer prices index including owner occupiers’ housing costs (CPI-H) remained at 2.8% in the year to November.

‘Higher inflation is putting further strain on family finances’

Ben Brettell, senior economist at Hargreaves Lansdown, says: “When Mark Carney pens his letter to the chancellor he’ll have a ready answer as to why inflation is so high - we’re still seeing the effect of the weaker pound filtering through to prices. Given Mr Carney and his colleagues raised interest rates last month, he’ll also be able to point to the fact that, for once, he’s doing something about it too.

“That’ll be of small comfort, however, to households facing a significant increase in the cost of Christmas this year. Some of the biggest contributors to the inflation rate were food and recreational goods such as computer games.”

Alistair Wilson, head of retail platform strategy at Zurich, says: “Higher inflation is putting further strain on family finances as we approach what is already the most expensive time of the year, and it looks set to remain above the rate of wage growth as we move into 2018. 

“While there are positive signs that a pay rise may be around the corner for Britain’s workers, with the recent Budget promising an above-inflation pay rise in the new year for those on the minimum wage, it can be all too easy for this to fall away on daily spending rather than make a difference in the long-run.”

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