Expensive Christmas this year as food prices skyrocket
LONDON: British inflation has hit its highest level in almost six years, official data showed yesterday, forcing Bank of England governor Mark Carney to explain the rise in an exceptional letter. The Consumer Price Index climbed to 3.1 percent on a 12-month basis in November compared to 3.0 percent in October, the Office for National Statistics (ONS) said in a statement. Analysts’ consensus forecast had been for no change to the CPI reading. Carney must send a letter to British finance minister Philip Hammond, explaining why inflation overshot the Bank of England’s 2.0-percent target rate by more than one percentage point.
The open letter, which must outline what action the BoE’s Monetary Policy Committee is taking to return inflation to target, will be published by the bank in February. Such a letter was last published a year ago, after inflation fell by more than one percentage point below target in October 2016.
The headline measure for November this year was spurred on by the high price of air fares, recreational goods and the rising cost of food and non-alcoholic drinks, the ONS said.
It said that rising prices of computer games had a notable upward effect and higher transport prices were fuelled by the rise in Brent oil prices and a falling pound.
“Christmas dinner is going to be a lot more expensive this year,” said Frances O’Grady, head of the TUC umbrella body for unions. “Food prices have gone up at twice the rate of wages.” Average wage growth continues to lag behind the rise in prices, meaning that real pay packets are falling.
Financial Secretary to the Treasury, Mel Stride said she recognized families were “feeling the squeeze”. “We are determined to help,” she added, pointing to recent pay-boosting measures by the Conservative government of Prime Minister Theresa May. Last month, the Bank of England increased its main interest rate for the first time since before the financial crisis, in a bid to tackle high inflation caused largely by the pound falling in the wake of Britain’s vote for Brexit.
“While the one rate hike so far was never meant to slay the inflation dragon straight away, (the latest inflation figure) will doubtless come as an unpleasant shock, and a sign that there will be further tough decisions in the months to come,” commented Chris Beauchamp, analyst at online trader IG.
“While inflation is expected to weaken in due course, potentially lessening the pressure on the BoE, it could be an anxious time over Christmas,” the expert said. – AFP