By Max Clarke

The consumer prices index (CPI) of inflation has edged up once more, reaching 4.5% in August 2011.

The biggest upwards pressure came from the continued upward trajectory of oil prices worldwide, resulting in price rises in fuels, lubricants and domestic heating.

“It seems that higher utility bills and clothing costs have been mitigated by falls in food prices,” commented Jeremy Cook, chief economist at currency exchange brokers, World First.

The latest inflation rise will likely further deter the Bank of England from adding to the Bank’s £200bn asset purchase programme, despite suggestions that an increase in quantitative easing is needed to facilitate lending and kick-start the UK recovery, as Jeremy Cook explains:

“When it comes to the key question of whether to pursue another round of quantitative easing, this figure just perpetuates the uncertainty around their decision. Some MPC [Monetary Policy Committee] members will be looking at this figure and it will reinforce their beliefs that inflation is too high for further asset purchases. While some will disregard this figure in the hope that prices moderate."

Having dipped somewhat in recent months, retail prices index of inflation edged back to its 5.2% high, driven again by soaring fuel prices.


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