Inflation remains at 3.1%

Posted on October 13th, 2010 | Categories - Financial News

The Consumer Price Index (CPI) has remained at 3.1% for the fourth consecutive month, according to the Office for National Statistics (ONS). However, the Retail Prices Index (RPI) which includes the cost of housing fell back slightly to 4.6%.

Many experts believe that with predicted rises in food prices and the 2.5% increase in VAT planned for next January the cost of living will not ease. The price of clothing and footwear rose by 6.4% last month, marking the biggest recorded rise.

Jonathan Loynes, chief European economist at Capital Economics, said: “Our guess is that the rise is a result of some retailers starting to raise their prices ahead of the coming VAT hike – and other temporary effects may have played a part too”.

The stationery Consumer Prices Index (CPI) figure could apply further pressure on members of the Monetary Policy Committee as they decide whether to raise the 0.5% interest rate, which has remained unchanged for the past 19 months.

Mr Loynes said: “Overall, the stubbornness of inflation is certainly not making life easy for the Bank of England. But it is unlikely to prevent the monetary policy committee from implementing more quantitative easing (QE) if, as looks likely, it decides that the economy requires more support”.

Last month MPC member Andrew Posen called for an expansion in QE and fellow member Andrew Sentance voted for a rate rise for the fourth consecutive month.