UK consumer price inflation climbs to 3.3 percent, as food and fuel send rate to 11-yr high.
Inflation in Britain hit 3.3 percent in May, the highest annual rate in 11 years, the government said Tuesday, putting more pressure on the Bank of England to keep prices under control. The price of meat, vegetables and fuel were key factors in pushing the index up from 3 percent in April, a full point above the government's inflation target.
The governor of the Bank of England, Mervyn King, is now obliged to write a letter to Treasury chief Alistair Darling explaining why the rate has shot above 3 percent. Concern about rising inflation has led the Bank of England to hold base interest rates at 5 percent, and many analysts now expect the bank to raise the interest rate further in coming months despite the general slowing of the British economy. Cutting rates can boost growth but also risk worsening inflation.
"The initial market reaction to the announcement was relatively stolid, with the majority of the inflationary increase having been priced in," said Richard Hunter, analyst at Hargreaves Lansdown Stockbrokers. "(Darling's) response to the letter and the next set of economic numbers will now take on more significance."
The consumer index is now at the highest level since the statistics agency began tracking it in 1997. A different measure, the Retail Prices Index rose to 4.4 percent in May from 4 percent in April, the Office for National Statistics (ONS) said.
The headline rate of RPI inflation, which includes mortgage interest payments, rose to 4.3 percent in May from 4.2 percent in April, the ONS said. "The one thing that can be said with a fair degree of confidence at the moment is that interest rates will not be coming down further any time soon and that if the Bank of England does act in the near term, it will be to raise interest rates," said Howard Archer, chief European economist at Global Insight.
"Inflation concerns are likely to intensify in the coming months," said Malcolm Barr, economist at JP Morgan. "In the absence of a marked fall in global commodity prices, the period of high inflation and letter-writing from the (Bank of England) is likely to extend into the second quarter of 2009," Barr said.
Inflation in Britain hit 3.3 percent in May, the highest annual rate in 11 years, the government said Tuesday, putting more pressure on the Bank of England to keep prices under control. The price of meat, vegetables and fuel were key factors in pushing the index up from 3 percent in April, a full point above the government's inflation target.
The governor of the Bank of England, Mervyn King, is now obliged to write a letter to Treasury chief Alistair Darling explaining why the rate has shot above 3 percent. Concern about rising inflation has led the Bank of England to hold base interest rates at 5 percent, and many analysts now expect the bank to raise the interest rate further in coming months despite the general slowing of the British economy. Cutting rates can boost growth but also risk worsening inflation.
"The initial market reaction to the announcement was relatively stolid, with the majority of the inflationary increase having been priced in," said Richard Hunter, analyst at Hargreaves Lansdown Stockbrokers. "(Darling's) response to the letter and the next set of economic numbers will now take on more significance."
The consumer index is now at the highest level since the statistics agency began tracking it in 1997. A different measure, the Retail Prices Index rose to 4.4 percent in May from 4 percent in April, the Office for National Statistics (ONS) said.
The headline rate of RPI inflation, which includes mortgage interest payments, rose to 4.3 percent in May from 4.2 percent in April, the ONS said. "The one thing that can be said with a fair degree of confidence at the moment is that interest rates will not be coming down further any time soon and that if the Bank of England does act in the near term, it will be to raise interest rates," said Howard Archer, chief European economist at Global Insight.
"Inflation concerns are likely to intensify in the coming months," said Malcolm Barr, economist at JP Morgan. "In the absence of a marked fall in global commodity prices, the period of high inflation and letter-writing from the (Bank of England) is likely to extend into the second quarter of 2009," Barr said.
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