UK inflation unexpectedly accelerated to the fastest in more than five and a half years in November, forcing Bank of England Governor Mark Carney to explain why price growth is so far above target.
Consumer prices rose 3.1 per cent from a year earlier, driven by the cost of air fares and computer games, the Office for National Statistics said on Tuesday. That’s up from 3 per cent in October and the highest since March 2012.
The pound initially climbed after the data before erasing its advance.
The latest reading means Mr Carney is now compelled to write to Chancellor of the Exchequer Philip Hammond explaining why inflation is more than 1 per centage point away from the official 2 per cent target.
The letter will be published alongside the BOE’s policy decision in February, rather than this week, as the Monetary Policy Committee has already started its meetings for its December 14th announcement.
The inflation rate in November was faster than the 3 per cent pace forecast by economists in a Bloomberg survey. Core inflation, which excludes volatile food and energy prices, was unchanged at 2.7 per cent, also the highest since 2012.
While headline inflation is forecast to ease through 2018, BOE officials increased their benchmark interest rate last month for the first time in a decade to keep a lid on domestic price pressures.
They said low unemployment and a squeeze on supply could fuel faster wage growth, one of their key metrics.
Inflation in 2017 was pushed higher by the weaker pound after the Brexit vote. That forced up import prices, eroding living standards for British workers as wages fail to keep pace.
Upward pressure on inflation last month came from the price of computer games and air fares falling less than they did a year earlier, as well as fuel prices, the ONS said.
Higher chocolate prices saw food and non-alcoholic drink rise 4.1 per cent in the year through November, the fastest since 2013.
Downward pressure came from computer equipment, while clothing and footwear costs rose more slowly than a year earlier.
Oil prices climbed last month, and the effect was seen in factory input prices, which rose 1.8 per cent, the most in three months. There could be further pressure in December after disruptions to a key North Sea pipeline sent crude prices to their highest in two and a half years.
Input prices are up 7.3 per cent from a year earlier but competition has forced manufacturers to absorb some of pressure, with output prices increasing just 3 per cent over the same period.
-Bloomberg
