Main Menu

Relief for Bank of England

Inflation in October unchanged at 3%

IMoney - own picnflation in October came in unchanged at 3%, according to the Office for National Statistics.

Jacob Deppe, head of trading at online trading platform, Infinox said the figure will come as a relief to the Bank of England following last week’s rise in the interest rate.

:Bank of England Governor Mark Carney has been let off the hook by today’s Consumer Price Inflation (CPI) figure,” he said.

“The fact CPI was unchanged last month will no doubt come as welcome relief. Had CPI risen above 3%, Mr Carney would have found himself writing a letter to the Chancellor explaining why.

“He would almost certainly have said the rise in inflation was only temporary and directly related to Sterling’s weakness versus the Dollar and Euro.

“Mr Carney would probably also have argued the effect of the first interest rate rise in a decade less than a fortnight ago had yet to be felt and would have said more time was needed for this to feed through into the wider economy.

“In any case he doesn’t have to. There is debate in the markets about whether November’s interest rate rise was a ‘one and done’ rise or whether we will see further rate rises in the coming months. Today’s CPI data eases the pressure for another interest rate rise in the next few months considerably.”




Tom Selby, senior analyst at AJ Bell, comments: “UK household finances are being squeezed by a triple whammy of stubborn inflation, weak wage growth and higher debt costs in the form of rising interest rates.

“The weak pound continues to push up the costs of food, clothing and leisure activities while the rising oil price means transport costs are also marching higher.  With average wage growth running at 2.2% and an interest rate hike starting to increase mortgage repayments for many, UK consumers will be starting to feel the pinch.  

“The Governor of the Bank of England, Mark Carney previously said he expects inflation to peak around October and it’s not just the UK consumer that will be hoping he is correct. 

“Philip Hammond will be acutely aware that the UK economy remains precariously balanced as he prepares for his first Budget since the election next week.  UK retailers are also likely to feel the pressure if consumers are forced to reign in their spending in the crucial Christmas trading period.

“However, we are by no means at crisis point.  The deflationary forces of consumer debt and the internet are still at work and are likely to prevent inflation running out of control.  By historical standards 3% is relatively modest and the Bank of England still has plenty of scope to use interest rate increases to bring it back down towards its 2% target.”

TUC General Secretary Frances O’Grady said: “The government must stop turning a blind eye to Britain’s cost of living crisis. Household budgets are being stretched to breaking point.

“Wages will continue to lag behind inflation unless the Chancellor acts.

“Next week’s Budget is a chance to give five million public sector workers the pay rise they are long overdue. And its a chance to invest in the kind of high-skilled jobs people can live on.”

 

Share The News Tweet about this on TwitterShare on FacebookShare on Google+Email this to someoneShare on LinkedIn





Leave a Reply

Your email address will not be published. Required fields are marked as *

*