Tuesday, March 22, 2011

United Kingdom: CPI Inflation At 4.4%, RPI Inflation At 5.5%

United Kingdom?s inflation continued to accelerate in February.  The Office for National Statistics? figures showed that CPI (all item) increased 4.4% in February over a year ago, vs. 4.0% in January and 4.2% of consensus estimates.  The Retail Price Index (RPI) increased 5.5% over a year ago, fastest rate of increase in 20 years.

Source: Office for National Statistics

There are actually more bad news.  On Wednesday, the Chancellor of the Exchequer will announce the UK Budget 2011.  Ahead of the Budget though, the February net borrowing reached �11.8 billion vs. �7.2 billion of consensus estimates despite government austerity as government?s revenue dropped and spending increase.  Inflation will mean that the government will have to borrow more than planned, which will be bad news for George Osborne.

Although inflation will certainly give more pressure to the Bank to increase interest rate in the next meeting, the CPI inflation now is still within the Bank of England?s latest Inflation Report forecast, and some members might believe that the slack within the economy will keep the inflationary pressure downward.  We will have the Bank of England MPC Minutes for February meeting tomorrow, and we should better see how the members voted in the February rate decision before guessing what would happen in the next meeting.

This article originally appeared here: United Kingdom: CPI Inflation At 4.4%, RPI Inflation At 5.5%
Also sprach Analyst - World & China Economy, Global Finance, Real Estate

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