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Inflation...has it hit the bottom?

The fall in inflation should be good news, but rising energy prices combined with sluggish wage increases mean the impact may not be felt.

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Bank of England's QE programme 'is adding to inflation'

Critics say the Bank of England's quantitative easing (QE) programme is adding to inflation while savers and pensioners also suffer from prolonged low interest rates.

Last week the Bank of England fuelled speculation that it is close to ending its multibillion-pound quantitative easing programme after deciding against a further cash injection.

UK inflation predicted to edge up to 2.4%

Howard Archer, chief European and UK economist at IHS Global Insight, has predicted inflation would edge up to 2.4% today.

Inflation would edge up to 2.4%, experts have said Credit: Owen Humphreys/PA Wire

He said food prices were also likely to have risen as a consequence of recent poor harvests overseas and very wet weather in the UK.

Philip Shaw, chief economist at Investec, said September's 34-month CPI low seemed as close as the Bank of England's Monetary Policy Committee would get to hitting its 2% target for quite some time.

Mr Shaw also predicted official statistics would show the consumer price inflation edged up to 2.5% in October and could be as high as 3.5% by mid-2013.

He also said that inflation had been pushed up by a small amount as more goods and services were liable for VAT.

Tuition fees increase blamed for latest CPI figure

A near trebling of university tuition fees after the Government lifted the cap to £9,000 this year is likely to have pushed up the latest CPI figure.

Inflation
University fees went up to £9,000 a year Credit: Chris Ison/PA Wire

The October statistics will also include the first of the energy price rises ahead of winter.

SSE was the first energy company to increase its prices, hitting its customers with an average 9% increase on October 15.

But the full extent of energy price rises by all of the "big six" energy suppliers apart from E.ON will not be felt until later in the year, with npower and British Gas raising their prices this month.

Howard Archer, chief European and UK economist at IHS Global Insight, predicted inflation would edge up to 2.4% today.

He said food prices were also likely to have risen as a consequence of recent poor harvests overseas and very wet weather in the UK.

Inflation expected to edge up as consumers feel the heat

Inflation will edge up today as consumers start to feel the heat of rising energy prices, food costs and university tuition fees.

Inflation
Inflation is expected to edge back up today Credit: Dominic Lipinski/PA Wire

Experts predict that the consumer price index (CPI) for October will be 2.3%, having been at a 34-month low of 2.2% in September, with some predicting the rate could go as high as 2.5%.

Inflation has fallen back from a three-year high of 5.2% in September 2011 but there are fears the rate could reach 3.5% by the middle of next year.

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Labour: Families and pensioners still squeezed

Labour warned despite the fall in inflation, millions of families and pensioners will still be worse off.

This fall in the inflation rate is welcome, but families and pensioners will face a real squeeze from big hikes in energy and food prices in the coming months. Instead of easing the squeeze, the Government is making things even harder for families on low and middle incomes. Millions of families and pensioners will be worse off because of the 3p rise in fuel duty and cuts to child benefit in January, and the granny tax which comes in on the same day that millionaires get a tax cut in April.

– Cathy Jamieson MP, Shadow Treasury Minister

Bank of England inflation target called into question

Saga today expressed concern that older people are continuing to experience higher costs of living than the rest of the population.

Inflation has fallen this month, reflecting a sharp decline in electricity and gas price inflation as last Septembers price rises have dropped out of the annual rate of inflation. However, with price rises announced for later this year, this is likely to prove a short-lived easing of inflation. Indeed, we expect that this is the low point in the current inflation cycle.

It seems, therefore, that unless the Bank of England has given up on reaching its target rate of 2%, it may be setting itself up for a fall as these energy price rises will undoubtedly make this target impossible to reach next month.

– Dr Ros Altmann, Director-General, Saga
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