Articles - UK inflation rockets to 20-year high

 The estimate for September CPI inflation showed a sharp rise in the annual rate, rising from 4.5% to a painful 5.2% - equalling the previously recorded highest rate on record back in September 2008.

 The ONS estimate was considerably higher than the consensus amongst city Economists which had estimated a rise to 4.9% (Schroders 4.8%). The CPI measure only goes back to 1997, however the older RPI measure recorded a rise in the annual rate of 5.6%, up from 5.2% last month, its highest rate since December 1991.

 No prizes for guessing that the main factor behind the sudden jump was the increase in utility prices (7.5% for electricity, 13% for gas) over the end of August and September, which contributed to almost three quarters of the rise in CPI inflation on the month (0.6%). However, with the exception of 2010, last month saw the largest rise in clothing and footwear prices for any September since 2002, with women's outerwear seeing the biggest increases in price inflation.

 Though the Bank of England (BoE) did warn that inflation could hit 5%, today's inflation release will come as a blow for savers and pensioners, who are forced to endure very negative real interest rates. With the BoE now resuming its Quantitative Easing (QE) programme, we wonder how far the bank can push before it loses its credibility as an inflation fighter. The Banks has consistently pointed to the increase in VAT as a temporary factor that is distorting the true rate of inflation, however today's numbers show that when the ONS excludes the impact of increase in taxes, CPI inflation is still running at 3.7% - well above the Bank's target. Nevertheless, we expect the Bank of England to downplay the 20-year high in RPI inflation, and look to inject more money into the economy with even more QE in February.

Back to Index

Similar News to this Story

Mean Reversion in Equities
A common argument in favour of equity investments is that, even though they go down, they will bounce right back up again. Commentators may advise “
How to get the most out of your insurance consultant
More than half of UK life insurance companies (59%) will spend more on actuarial consultants in the next year. This is one of the key findings of our
Video of what a cyber attack looks like in the real world
Hackers and their scams live behind keyboards. Invisible and faceless. Hiscox show how it would look ff cyber crime happened in the physical world, th

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS


Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.