The Office for National Statistics said on Wednesday that the Consumer Prices Index increased by 3.1 per cent in the 12 months to August, in line with analysts’ expectations.
The latest figures are expected to increase pressure on Prime Minister Andy Burnham and Finance Minister John Healey to take further measures to ease cost-of-living pressures ahead of the Labour government’s budget update on October 28.
The Bank of England is widely expected to keep its benchmark interest rate at 3.75 per cent on Thursday as the British economy continues to face weak growth.
Meanwhile, higher energy costs are expected to keep inflation elevated in the coming months, particularly if the Middle East conflict continues without a resolution.
Analysts also expect the government to face difficult decisions over its fiscal plans, with Healey having pledged to maintain strict financial discipline while declining to say whether the October budget will include new tax increases.
Richard Carter, head of fixed interest research at Quilter Cheviot, said inflation could continue to rise towards the end of the year as higher energy costs feed through to household bills.
“With the situation in the Middle East looking increasingly fraught, the expectation is that inflation will continue to climb higher until the end of the year at a minimum,” Carter said.
He added that the latest figures represented a setback for the government’s efforts to make easing the cost of living a central part of its agenda.
Post a Comment