Food and tuition fees rise send inflation soaring to 2.7%


Bank of England Governor Sir Mervyn King may need a new pen for Christmas after a shock rise in inflation last month, experts warned.

The coalition’s trebling of tuition fees and rising food prices pushed the Bank’s Consumer Prices Index to 2.7 per cent from 2.2 per cent in September — far more than expected and the largest rise in a single month since 2007.

Sir Mervyn has to write an open letter to the Chancellor when the CPI exceeds 3 per cent, although he has not been forced to do so since February because inflation has trended downwards until today’s spike. Economists warned the Governor will come perilously close to breaching the 3 per cent ceiling again in the months ahead  with the full brunt of gas and electricity prices still to be felt in the figures.

ING Bank UK economist James Knightley said: “Utility providers have announced steep rises, the majority of which will come into effect in early December. As a result, we could see inflation moving back up to 3 per cent  by January.”

The Bank’s monetary policy committee had early sight of the number, which helps explain its reluctance last week to expand quantitative easing, with tomorrow’s inflation forecasts set to show more bad news.

Nida Ali, economic adviser to the Ernst & Young ITEM club, said. “These figures do suggest that household finances remain under pressure and provide another reason to be concerned about the outlook for growth in the fourth quarter.”