- U.K. Inflation Holds at 3% as Projected By BoE
Rising cost of living in the U.K pushed consumer prices to 5.5-year high in October.
Consumer Price Index which measures inflation rate climbed 3 percent in October, according to the Office for National Statistics. This is better than the 3.1 percent expected by economists and same as what was obtained in September.
The Governor of the Bank of England, Mark Carney, earlier this month said inflation rate is expected to be above 3 percent in October due to the past pound depreciation and low energy prices.
The central bank raised its benchmark rate by 25 basis points in November to 0.5 percent, saying surging inflation rate is hurting consumer spending and business profits.
Despite the uncertainty surrounding the British economy ahead of Brexit, the economy remains resilient. The services and manufacturing sectors expanded more than expected in October, indicating that the U.K. economy continued to thrive on improved global economics.
Also, the construction sector rebounded from a record low in October as the gauge of new business investment surged slightly in the sector.
Experts believe inflation may have peaked, especially with the central bank projecting a slowdown in the coming months and through 2018.
“On balance, inflation is expected to fall back over the next year and, conditioned on the gently rising path of Bank Rate implied by current market yields, to approach the 2 percent target by the end of the forecast period,” the monetary statement report reads.
The report showed headline inflation was driven mainly by food prices, which climbed 4.2 percent year-on-year. The highest in four years. On a monthly basis, food prices climbed 0.6 percent, largely due to the 12 percent drop in the pound’s value this year.
However, cheap gasoline prices helped curtail headline inflation. Cost of auto fuel declined by 0.4 percent in the month when compared with the 2.3 percent from a year earlier.
The pound dropped 0.3 percent against the US dollar after the report to $1.3073.