By Max Clarke

Inflation in the UK, the Office for National Statistics this morning confirmed, climbed yet again last month, topping 4.4%.

Whilst the rise had largely been expected, its rise has been attributed to contrasting factors. Following are comments from business organistaions, economists and trades unions discussing both the causes, and the likely effects of the UK’s inflation.

David Kern, Chief Economist at the British Chambers of Commerce, said the rise was predictable due to global commodity surges and that it will rise further before trailing off in 2012. Said Kern:

“The increase in CPI was broadly as expected, but the unchanged RPI figure slightly better than predicted. Higher utility prices will likely push up inflation further over the next few months to around 4.8%, lower than the figure predicted by the Bank of England.

“While rising inflation will be uncomfortable for the MPC, the worsening prospects for global growth will reinforce the downward pressures on energy and commodity prices. This increases the likelihood that UK inflation will fall steadily throughout 2012.

“The international factors pushing up UK inflation are temporary, adding to the pressures felt by businesses and consumers. The government must continue with measures to reduce the deficit, and the MPC must maintain interest rates at current low levels until at least early 2012. If signs of weakness in the economy worsen, the MPC should give consideration to increasing its QE programme beyond £200bn.”

Brenden Barber, head of the Trades Union Congress, blasted the government’s economic policies and the switch from the retail price index of inflation to the lower consumer price index, further squeezes those on low incomes.

“The cost of living is rising twice as fast as wages, and with business confidence low the wages gap is set to continue for some time,” said Barber.

“While rail commuters despair at the prospect of 8 per cent fare rises next January, savers will be fuming at the government's stealth cut on pensions as a result of the switch to the lower CPI inflation measure - which could slash the value of their pension by 15 per cent over the next 20 years.”

“The government's selective switch from RPI to CPI means higher costs for students and commuters, and less in return for pension savers, taxpayers and job seekers.”

Rick Roache, senior trader at World First currency traders again anticipated the rise as hinted by the Bank of England, adding:

“We expected a slight rise in inflation to something like 4.4% vs 4.3% consensus, as we head towards the 5% mark outlined by the Band of England in last week’s quarterly inflation report.

“This will support the pound slightly as it may bring forward interest rate expectations which are currently not pricing in a hike until 2013.”

Also commenting is Dave Prentis, General Secretary of public sector union, Unison, who blames the government's cuts agenda for the inflation rise:

“This sustained pressure on family budgets is making life tough for millions of households across the country. We already know the low paid are hit hardest by this government’s cuts — and now they are bearing the brunt of the rise in the cost of living.

“Many of those stuck on a pay freeze — which includes even low paid local government workers - already struggle with heavy debt. Cutting back on basic essentials like food, and even spending on their children, are the things people are doing as they struggle to cope. The threat of the heat or eat dilemma is looming large as winter approaches.

“It is time for the government to think again about the hard and fast cuts and put in place an economic strategy that helps families to cope at this difficult time.”
#inflation, #ukeconomy

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