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| UK inflation up to 4.7% in August | UK inflation up to 4.7% in August |
| (about 1 hour later) | |
| The UK's annual rate of inflation has risen to 4.7% in August, up from 4.4% in July. | The UK's annual rate of inflation has risen to 4.7% in August, up from 4.4% in July. |
| Bank of England Governor Mervyn King has had to write a letter to the chancellor explaining why inflation is higher than the government's 2% target. | |
| Higher energy and food bills sent the Consumer Price Index (CPI) higher, the Office for National Statistics said. | Higher energy and food bills sent the Consumer Price Index (CPI) higher, the Office for National Statistics said. |
| Inflation as measured by the Retail Prices Index (RPI) - often used in pay negotiations - fell to 4.8% from 5%. | Inflation as measured by the Retail Prices Index (RPI) - often used in pay negotiations - fell to 4.8% from 5%. |
| The Bank of England's Monetary Policy Committee has not been able to consider a cut in interest rates to boost the flagging UK economy while inflation keeps rising. | The Bank of England's Monetary Policy Committee has not been able to consider a cut in interest rates to boost the flagging UK economy while inflation keeps rising. |
| DEAR CHANCELLOR... The expected peak in inflation later this year is now likely to be significantly higher than anticipated Bank of England governor Mervyn King class="" href="http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/2008_09_16_boe_letter.pdf">Mervyn King's letter to the chancellor class="" href="http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/2008_09_16_chancellor.pdf">Chancellor Alistair Darling's reply Most computers will open this document automatically, but you may need Adobe Reader href="http://www.adobe.com/products/acrobat/readstep2.html">Download the reader here But with the sharp fall in oil prices over the past month from their high of close to $150 a barrel, some analysts are optimistic that inflation could be near its peak. | |
| "This latest inflation figure, coupled with the recent moves in energy prices, could be an indication of inflation nearing its peak," said Richard Hunter, an analyst at stockbrokers Hargreaves Lansdown. | "This latest inflation figure, coupled with the recent moves in energy prices, could be an indication of inflation nearing its peak," said Richard Hunter, an analyst at stockbrokers Hargreaves Lansdown. |
| He added: "This in turn could lead to a loosening of monetary policy by way of an interest rate cut in the UK, at a time when the markets are eagerly seeking signs of recovery." | He added: "This in turn could lead to a loosening of monetary policy by way of an interest rate cut in the UK, at a time when the markets are eagerly seeking signs of recovery." |
| 'Unanticipated' | |
| In an open letter to Chancellor Alistair Darling, the Bank of England Governor blamed "sharp, largely unanticipated" increases in food and energy prices for pushing inflation well above the government's target. | |
| He said that these pressures were pushing up consumer prices around the world, with eurozone inflation at 4% and US CPI at 5.6%. | |
| Despite having a share of less than a fifth of the overall basket of goods and services used to calculate UK CPI, energy and food accounted for 2.1% of the 2.6% increase in the inflation rate since last December, he said. | |
| The ONS said the largest contributor to August's rise in inflation was increasing gas and electricity tariffs, with a number of utility firms raising their prices last month. | |
| This outweighed the fall in the price of heating oil and petrol, which fell by 5.5 pence per litre between July and August to stand at 113.3p. |