Business

Inflation jumps to unexpected six-year high of 3.1%

Inflation has unexpectedly jumped to a near six-year high
Inflation has unexpectedly jumped to a near six-year high Inflation has unexpectedly jumped to a near six-year high

INFLATION has unexpectedly jumped to a near six-year high, forcing the Bank of England to explain to the Chancellor why the cost of living has surged.

Figures from the Office for National Statistics (ONS) show the Consumer Prices Index (CPI) rose to 3.1 per cent in November, up from 3 per cent in October.

It means inflation has climbed to its highest level since March 2012, with economists expecting CPI to hold steady for the third month in a row at 3 per cent.

The outcome means Bank Governor Mark Carney must pen a letter to Chancellor Philip Hammond outlining the reason behind inflation's rapid rise.

The Government has set a CPI target of 2 per cent, with protocol dictating that the Bank must contact Mr Hammond if inflation exceeds 3 per cent or falls short of 1 per cent.

The move will pose fresh questions to the Bank's interest rate-setting Monetary Policy Committee (MPC) about whether or not inflation has peaked.

The MPC is gearing up to announce its latest decision on interest rates this Thursday after hiking the cost of borrowing to 0.5 per cent last month.

Sterling was up nearly 0.3 per cent versus the US dollar at 1.337 following the announcement, and was higher by around 0.2 per cent against the euro at 1.135.

Mike Prestwood, ONS head of inflation, said: "CPI inflation edged above 3 per cent for the first time in nearly six years with the price of computer games rising and air fares falling more slowly than this time last year.

"These upward pressures were partly offset by falling costs of computer equipment."

The lion's share of the upward pressure came from air fares, which recorded a smaller drop between October and November at 10.4 per cent, compared with a 13.4 per cent fall over the period last year.

Computer games prices were also boosting everyday costs, as games, toys and hobbies lifted 3.7 per cent on an annual basis in November.

On the month, prices climbed by 2.2 per cent, compared with 0.7 per cent growth last year.

Food and non-alcoholic drinks prices pushed higher, picking up by 0.6 per cent month on month in contrast to a 0.5 per cent lift for the period in 2016.

Part of the rise was pinned on chocolate prices, with sugar, jam, honey, syrups, chocolate and confectionery up 1.5 per cent on the month after falling by 1.5 per cent for the same period last year.

Motorists were also facing higher fuel costs in November, with petrol up by 1.8p per litre month on month to 119.1p, and diesel rising by 2.3p a litre to 122.8p.

It comes after crude oil surged by 7.6 per cent between October and November, reaching its highest level since December 2016.

The Retail Prices Index (RPI), a separate measure of inflation, was 3.9 per cent last month, down from 4 per cent the month before.

The Consumer Prices Index including owner-occupiers' housing costs (CPIH) - the ONS' preferred measure of inflation - was 2.8 per cent in November, unchanged from October.