UK Inflation Reduces
UK inflation has reduced from 2.5% in August to 2.4% in September.
The reduction is said to be because of declining oil and petrol prices (which has seen the price of a litre of unleaded fuel reduce from around 100pence to 88pence in recent weeks).
The annual rise including mortgage payments increased from 3.4% to 3.6% because of increases in interest rates recently.
The Bank of England warned recently that this dip would occur although only as a temporary measure and the overall trend was upwards.
The Bank of England has kept interest rates on hold in September and October although not everyone wanted this strategy. The minutes of the last meeting saw two members voting for a quarter point rise in interest rates because of what they saw as potential increases in wages and general business price increases at the beginning of next year.
Analysts predict that UK interest rates will increase to 5% by the end of the year with a probable 0.25% increase in November.
The two newest members of the Bank of England committee, Timothy Besley and Andrew Sentance, wanted the rise.
But additionally this week, unemployment has continued its rise to its highest level in six years hitting 1.7million in August. This was a rise of 42,000 taking the jobless rate to 5.5% of the working population.
Wage inflation continued to remain moderate with annual wage inflation now at 4.2% a slight dip from the 4.3% in the previous quarter.
Mervyn King the Governor of the Bank of England is still warning of inflationary pressures. At a recent meeting in Winchester he said “the anticipated fall in inflation may not persist for long”
The BOE inflation target is set at just 2% so with current trends at around 2.5% and the only tool available to the BOE to reduce this is interest rates. So all they can do to meet the target is to increase the rates.
The BOE undertakes their own surveys to attempt to predict the future and one such survey of the Manufacturing industry suggests that their margins are being squeeze and they are looking to increase their prices to boost their profits.
