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Consumer inflation reaches 5.2% Consumer inflation reaches 5.2%
(19 minutes later)
The UK's benchmark inflation rate hit 5.2% in September, official figures have shown, with energy bills behind much of the rise. UK inflation hit 5.2% in September with energy bills behind much of the rise, official figures show.
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 (CPI) was up from 4.7% in August.Consumer price inflation (CPI) was up from 4.7% in August.
The Retail Prices Index (RPI) - used to work out benefits and state pensions for the coming year - reached 5%. September's Retail Prices Index (RPI) figure - used to work out benefits and state pensions for the coming year - reached 5% from 4.9% a month earlier.
RPI, which includes mortgage interest payments, had been 4.9% in August. Pensions usually increase by 2.5% or headline RPI, whichever is higher - meaning the government faces paying out billions more in benefits and pensions.
'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. Increased food and energy prices this year have been blamed for taking inflation beyond the government's 2% target.
And the Bank predicts it will remain above that level 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 government's 2% target. However the high inflation figure will be a reminder of the inflationary risk, observers say.
The annual rate of inflation for energy and other household bills reached 15% - the highest since 1989 - the Office for National Statistics said.
More expensive clothing, footwear, toys and games also added to the cost of living.
But food inflation slowed for the first time since March as the price of milk held steady, but the price of meat continued to climb.