UK Inflation Rises

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BBC

Tuesday, 12 December, 2000, 10:35 GMT UK inflation rises

The underlying rate of UK inflation rose to 2.2% in November, as the price of petrol at the pump continued to rise.

Most experts had forecast a rise in the underlying rate - which excludes volatile mortgage payments - to 2.1% from 2% in October.

But it is still well within the target of 2.5% set for the Bank of England's Monetary Policy Committee (MPC) by the government.

The MPC has left interest rates unchanged at 6% for the past ten months and speculation is now growing that the next move in interest rates will be down.

The headline rate of inflation in November rose to 3.2% from 3.1% the previous month, the Office for National Statistics added.

European pressures

The eurozone measure of inflation - the harmonised index of consumer prices - was unchanged in November at 1%, highlighting the fact that inflation in the UK is still lower than in the eurozone.

Consumer prices in Germany were 2.4% higher in November on the year while consumer prices in France were 2.2% higher, while the harmonised index of consumer prices showed a 2.2% rise in France and a 2.6% rise in Germany.

Inflation in those two countries was also attributed to rising petrol prices.

Many expect that UK inflation will dip again in December, as the effect of lower petrol prices is seen.

Other recent economic data has indicated that price pressure is subdued.

The price of goods leaving factories barely rose in November from October, as rising fuel prices were offset by a drop in car prices.

Geoffrey Dicks of Royal Bank of Scotland said that retailers had refrained from cutting prices in the pre-Christmas rush.

"Prices on the High Street... are holding up rather better - or rather worse from the inflation angle - than in previous years," he said.

Cost of fuel

The rise in inflation can be attibuted to higher fuel prices, in turn pushed higher by the rising price of crude oil, according to the ONS.

In November, the price of petrol rose by two pence a litre to 82p. This compared with a fall of one pence a litre to 73p a litre in the same month last year.

The rising costs of second-hand cars and of car insurance also bumped up inflation, the ONS said.

Some fear had existed that the flooding may have resulted in higher prices if the supply of seasonal food was disrupted.

Prices of seasonal foods did rise, but these rises were offset by the fall in prices of non-seasonal foods.

-- Rachel Gibson (rgibson@hotmail.com), December 12, 2000


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