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Inflation likely to hit 5% rate Consumer inflation reaches 5.2%
(about 2 hours later)
The UK's inflation rate could hit 5% when figures are released later, with energy bills behind much of the rise. The UK's benchmark inflation rate hit 5.2% in September, official figures have shown, with energy bills behind much of the rise.
However, analysts expect this to mark a peak, with inflation tipped to slow as a result of lower oil prices and reduced demand in a slowing economy.However, analysts expect this to mark a peak, with inflation tipped to slow as a result of lower oil prices and reduced demand in a slowing economy.
Consumer price inflation was 4.7% in August, up from 4.4% the month before. Consumer price inflation (CPI) was up from 4.7% in August.
The Retail Prices Index (RPI) is set to rise to about 4.9%. September's figure will be used to calculate benefits and state pensions for the coming year. The Retail Prices Index (RPI) - used to work out benefits and state pensions for the coming year - reached 5%.
RPI, which includes mortgage interest payments, had been 4.9% in August.
'Diluting' effect'Diluting' effect
The recent economic downturn has seen recession replace inflation as the key risk to the UK economy.The recent economic downturn has seen recession replace inflation as the key risk to the UK economy.
Last week, the Bank of England cut interest rates to 4.5% from 5% in a co-ordinated worldwide move. The Bank added that the risks of inflation had moved "decisively" to the downside.Last week, the Bank of England cut interest rates to 4.5% from 5% in a co-ordinated worldwide move. The Bank added that the risks of inflation had moved "decisively" to the downside.
The Bank predicts inflation will remain above the 2% target set by government until well into next year.The Bank predicts inflation will remain above the 2% target set by government until well into next year.
But reduced economic activity, rising unemployment and the continued difficulty in getting credit would curb spending and "dilute underlying inflationary pressures", said Howard Archer, chief UK and European economist with Global Insight,But reduced economic activity, rising unemployment and the continued difficulty in getting credit would curb spending and "dilute underlying inflationary pressures", said Howard Archer, chief UK and European economist with Global Insight,
"The recent marked retreat in oil and commodity prices will obviously help matters," he added."The recent marked retreat in oil and commodity prices will obviously help matters," he added.
Increased food and energy prices this year have been blamed for taking inflation beyond the 2% target. Increased food and energy prices this year have been blamed for taking inflation beyond the government's 2% target.
Economic downturn
The largest contributor to August's rise in inflation was higher gas and electricity bills
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 an average of 113.3p.
The latest indicator of the economic slowdown came from the latest survey by the Royal Institution of Chartered Surveyors. This indicated that house prices had continued to fall in September and sales per estate agent had been at their lowest level for 30 years.
Inflation is the rate of change in the level of prices for goods and services, which affects the purchasing power of money.
Both the CPI and RPI measure the prices of products and services that consumers buy.
A price index is made up of the prices of hundreds of goods and services - from basic items like bread to products, such as PCs.