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Inflation figures expected to rise


Tuesday January 18th 2011

Economists have predicted that official figures will show inflation rose further in December.

The experts expect the due-to-be-released figures from the Office for National Statistics (ONS) to show the consumer prices index (CPI) rose to 3.4% in December - a month-on-month increase of 0.1%.

The policy setters at the Bank of England, who are responsible for keeping CPI below the Government's target of 2%, have already warned that inflation may reach 3.5% early this year.

Further rises in inflation, which has been above target since November 2009, are expected, driven by the rising costs of commodities such as oil, coffee, sugar, cotton and wheat, and the recent VAT hike from 17.5% to 20%.

Increases in the prices of petrol and utility bills in December are also believed to have pushed inflation even further up.

Philip Shaw, an economist at Investec, expects CPI to have risen to 3.5% in December.

He said: "It seems likely that inflation will exceed the 4% level later in the year and there seems a growing risk that the targeted measure will remain in excess of 2% through 2012."

Economists at Barclays Capital forecast a 3.6% rise in inflation last month.

A note from the bank said: "We expect CPI inflation to rise to around twice the target rate during the first quarter.

"We expect inflation to remain well above target throughout 2011 before dropping slightly below target at the start of 2012."

Copyright © Press Association 2011

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