Inflation rate remains unchanged at 2.7%

 

Winter energy bill hikes helped keep the annual rate of inflation at 2.7% for the third month in a row, official figures showed today.

The Office for National Statistics (ONS) said the Consumer Prices Index (CPI) was unchanged in December, although some economists predict it could rise to above 3% by the summer.

Price increases from four of the "big six" energy suppliers came into effect last month, dampening the impact of a fall in fuel costs.

Housing and household costs, which includes gas and electricity, rose 2% between November and December.

But the rate of transport cost increases declined, with petrol prices falling by 2.8p per litre between November and December, compared with a fall of 1.1p a year earlier. Diesel prices fell by 1.4p per litre, compared with a year ago, the ONS said.

Today's figures also show the rate of the Retail Prices Index (RPI), which includes housing costs, rose to 3.1%, up from 3% last month. It was also pushed up by rising fuel bills.

Experts do not believe inflation will stay at 2.7% for long, with food inflation set to increase over the coming months after poor UK harvests due to last year's severe wet weather.

However, there was some encouragement from the first drop in the rate of core inflation since July.

Vicky Redwood, chief UK economist at Capital Economics, said: "In other words, sluggish consumer demand seems to have prompted retailers to discount a bit more heavily than last year over the festive period."

However, she predicted CPI will probably stay relatively high for most of this year, prompting households' pay in real terms to fall again in 2013. This will be followed by inflation falling back below its 2% target towards the end of the year as the food and energy effects fade.

A Treasury spokeswoman pointed out that inflation was nearly half of its 5.2% peak and that the Government had taken more action to help households with the cost of living, including a further increase in the tax-free personal allowance and cancelling the fuel duty increase that was planned for this month.

Above-target inflation is proving a headache for Bank of England policymakers as they weigh up mounting signs of economic gloom against faster increases in the cost of living.

The economy is looking likely to have suffered a fresh contraction in the fourth quarter, according to some estimates, and could be heading for an unprecedented triple-dip recession.

But the Bank may be reluctant to push the button for more quantitative easing (QE), given the outlook for inflation.

Labour Treasury spokeswoman Catherine McKinnell said: "It's worrying that inflation remains high and prices are continuing to rise so much faster than wages. But instead of easing the squeeze, ministers are adding to the cost of living crisis for people on middle and low incomes.

"On top of soaring energy bills, millions of families and pensioners will soon be hit by the Government's granny tax, cuts to working tax credit and child benefit while 8,000 millionaires get a tax cut.

"This out-of-touch Government has got its priorities all wrong. Instead of giving a £3 billion tax cut to the very richest David Cameron and George Osborne should be helping people on modest incomes who are struggling with the rising cost of living."

PA

PROMOTED VIDEO
Arts and Entertainment
tv
Sport
Ojo Onaolapo celebrates winning the bronze medal
commonwealth games
Arts and Entertainment
Rock band Led Zeppelin in the early 1970s
musicLed Zeppelin to release alternative Stairway To Heaven after 43 years
Arts and Entertainment
Tracey Emin's 'My Bed' is returning to the Tate more than 15 years after it first caused shockwaves at the gallery
artTracey Emin's bed returns to the Tate after record sale
Environment
Neil Young performing at Hyde Park, London, earlier this month
environment
News
i100
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
Prince Harry is clearing enjoying the Commonwealth Games judging by this photo
people(a real one this time)
Sport
Lionel Messi looks on at the end of the final
football
Extras
indybest
News
Richard Norris in GQ
mediaGQ features photo shoot with man who underwent full face transplant
News
Gardai wait for the naked man, who had gone for a skinny dip in Belfast Lough
newsTwo skinny dippers threatened with inclusion on sex offenders’ register as naturists criminalised
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Project Manager (HR)- Bristol - Upto £400 p/day

£350 - £400 per annum + competitive: Orgtel: Project Manager (specializing in ...

Graduate / Trainee Recruitment Consultant - IT

£25000 per annum + OTE £40,000: SThree: Orgtel are seeking Graduate Trainee Re...

HR Business Partner - Banking Finance - Brentwood - £45K

£45000 per annum + Benefits: Ashdown Group: ** HR Business Partner - Senior H...

PA / Team Secretary - Wimbledon

£28000 - £32000 per annum + Benefits: Ashdown Group: PA / Team Secretary - Mat...

Day In a Page

The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
Countries that don’t survey their tigers risk losing them altogether

Countries that don’t survey their tigers risk losing them

Jonathon Porritt sounds the alarm
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz
A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on