UK inflation to hold steady at 3.1% in October
The Office for National Statistics (ONS) is scheduled to announce the UK inflation rate for October tomorrow morning, with analysts expecting the annual rate to hold steady at 3.1%.
With inflation way above the 2% target, the Governor of the Bank of England, Mervyn King, will be forced to write a letter to Chancellor George Osborne (his fourth this year) to explain why inflation remains above target.
Inflation has remained stubbornly high over recent months and at the last four interest rate meetings, policymaker Andrew Sentance voted for rates to be lifted from their current historic low of 0.5% – where they have been since March 2009.
The CPI inflation rate is a benchmark for the Bank of England’s Monetary Policy Committee (MPC) but the Bank has already noted that inflation has remained more persistent than it had expected but a hike in interest rates are not required at this time.
The recent decision to hike VAT to 20% next year by the coalition Government will also undoubtedly keep inflation higher, the Bank has previously noted.
However, Mr Sentance has previously warned that the Bank faces losing its credibility if it is not seen to be fighting inflation.
Presenting the Bank’s Quarterly Inflation Report last week, Mr King said inflation will continue to stay high.
The ONS will publish inflation figures at 9:30 a.m. tomorrow.