Written by: Keith Tully
Reviewed: Wednesday 13th December, 2017
Consumers and households around the country are continuing to feel the financial squeeze as inflation remains well above the Bank of England’s target levels.
According to the latest data from the National Office for Statistics (ONS), the consumer price index (CPI) rate of inflation was tracked at 3.1 per cent in November.
That figure puts CPI inflation at its highest level for almost six years and 1.1 per cent higher than the Bank of England’s target figure of 2 per cent.
Rules defining the relationship between the bank and the government mean that Mark Carney, the bank’s governor, must now write to the chancellor of the exchequer Philip Hammond to explain how inflation will be kept in check and brought down going forward.
In his role as governor, Mr Carney is obliged to write a letter of explanation to the government whenever headline inflation rates go above 3 per cent.
For consumers, high and rising rates of inflation are potentially bad news in terms of their ability to spend and to save money, particularly because wages, although they are increasing, are not currently keeping pace with the rising prices of goods and services.
The ONS has said that prices in the context of travel and transport, particularly with regard to air fares and fuel costs, have been rising consistently and helping to put considerable upward pressure on inflation rates.
Imported goods have generally become more expensive in recent quarters as a result of the falling value of the pound, a factor which has been attributed in large part to the uncertainty created by the UK’s decision to exit the EU.
Concerns about the pace of inflation recently prompted the Bank of England to introduce its first rise in the base rate of interest in almost a decade.
However, this increase from 0.25 per cent to 0.5 per cent has clearly yet to have the desired effect of curbing CPI inflation.
Economic analysts are concerned that rising prices will discourage consumers from spending during the festive period, which is traditionally the most important time of the year for retail businesses throughout the country.