Money Inflation expected to stay at highest level in nearly four years

07:35  17 july  2017
07:35  17 july  2017 Source:   Press Association

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- Inflation is expected to remain at its highest level in nearly four years , as rising prices on the back of the Brexit-hit pound continued to squeeze British households. It would leave inflation at a near four - year high , as the last time inflation reached 2.9% was June 2013.

Inflation is expected to remain at its highest level in nearly four years , as rising prices on the back of the Brexit-hit pound continued to squeeze British households. It would leave inflation at a near four - year high , as the last time inflation reached 2.9% was June 2013.

UK economy © PA WIRE UK economy  Inflation is expected to remain at its highest level in nearly four years, as rising prices on the back of the Brexit-hit pound continued to squeeze British households.

The Consumer Price Index (CPI) measure of inflation is forecast to come in at 2.9% in June, according to consensus estimates, in line with May's figure but above April's reading of 2.7%.

It would leave inflation at a near four-year high, as the last time inflation reached 2.9% was June 2013.

The figures will extend the squeeze on household finances as inflation outstrips wages, with CPI having soared as the Brexit-hit pound pushed up the price of imported goods.

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London: British inflation unexpectedly jumped to its highest level in nearly four years in May, tightening the squeeze on consumers who now face the added worry of political uncertainty after last week's inconclusive election.

Inflation is expected to remain at its highest level in nearly four years , as rising prices on the back of the Brexit-hit pound continued to squeeze British households. The Consumer Price Index (CPI) measure of inflation is forecast to come in at 2.9 per cent in June, according to consensus estimates

Road fuel prices are believed to have dropped by around 1.1% month-on-month in June, according to Scotiabank's estimates, while core items such as clothing, household and recreational goods continued to rise.

Alan Clarke, head of Scotiabank's European fixed income strategy, said food prices and air fares likely made the most notable gains last month, alongside smaller increases in alcohol costs, restaurant prices and package holidays.

If consensus forecasts are correct, CPI will continue to outpace the Bank of England's 2% target and will put pressure on policymakers to consider hiking rates beyond 0.25%.

The Bank of England said in its May inflation report that CPI would peak at 3% later this year, as the pound's slump following the Brexit vote causes price tags on everyday items to tick higher.

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Inflation stays at the highest level since January, mainly boosted by rise in prices of food and services, and cost of energy fell less than in July. German Inflation Rate At Nearly 5- Year Low German annual inflation rate is German Inflation Rate Confirmed At Highest Level In 4 -1/2 Years .

UK inflation rises 2.9% year -on- year in May, compared with forecast for 2.7% growth. Higher electricity and food prices also contributed to drive the rate of inflation higher , offsetting a decline in fuel prices and air fares. More. Stay up to date with our daily newsletter.

Mr Clarke said he believes CPI will exceed consensus estimates, having reached 3% in June, forcing the Bank's governor, Mark Carney, to write an official letter to the Chancellor explaining why inflation has surpassed its target by 1%.

"(If) inflation does enter letter writing territory, it will be symbolic and provide ammunition to the hawks on the MPC (Monetary Policy Committee)," Mr Clarke said.

"To be clear, the MPC is not short-sighted; their focus is the medium-term outlook.

"Nonetheless, a sufficiently big upwards revision to near-term inflation is likely to have ripple effects on the medium-term outlook, which could be used to justify policy tightening."

Recent comments from MPC members including Mr Carney have suggested there is growing support for a rate hike.

Mr Carney said at the end of last month that "some removal of monetary stimulus is likely to become necessary", but would depend on whether an increase in business spending could counter the slowdown in consumer consumption triggered by rising inflation.

Ian McCafferty, Kristin Forbes and Michael Saunders voted for a rise in June and chief economist Andy Haldane has suggested in a recent speech he may support a "prudent" increase this year.

But it is unclear how many policymakers will vote for a rise as soon as next month, with Ms Forbes having stepped down at the end of last month.

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