The UK's annual rate of inflation rose to 3.2% last month in a shock hike - 24 March 2009 - The real truth about politics
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Main » 2009 » March » 24 » The UK's annual rate of inflation rose to 3.2% last month in a shock hike
The UK's annual rate of inflation rose to 3.2% last month in a shock hike
20:34

The Consumer Prices Index (CPI) rose unexpectedly from 3% in January.

It was driven largely by a rise in food and drink prices which are soaring as retailers look to offset higher import costs from the weak pound, according to the Office for National Statistics.

It had been predicted that Britain would plunge into deflation for the first time in 50 years - a move that would damage the economy in the long-term.

The rise will now see central bank boss Mervyn King write to Alistair Darling, explaining why inflation is still more than 1% above the Government's 2% target.

Data shows that the cost of food stuffs was largely behind the surprise rise.

This includes the fact that price of vegetables was hit by a poor crop in Spain.

Transport prices also added to the inflation rise, with the average price of petrol rising by 3.2p a litre to 89.5p a litre.

It had been thought that moves from utility firms to lower energy tariffs would have helped bring CPI down.

Morrisons

Fuel price rises have added to inflation

Despite the rise, inflation is still expected to fall later in the year, probably into deflation.

Economists had predicted the Retail Prices Index (RPI) to have slumped into negative territory by as much as minus 0.7% as a result of the dramatic falls in interest rates and house prices.

But RPI is still at its lowest level since March 1960 in what will be seen as a worrying sign, given its key role in wage negotiations and pension payments.

RPI has fallen by more than the official CPI rate as it also includes housing and mortgage costs, which have reduced dramatically amid the recession.

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