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Consumer inflation reaches 5.2% Consumer inflation reaches 5.2%
(10 minutes later)
UK inflation hit 5.2% in September with energy bills behind much of the rise, official figures show.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.
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.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.
Pensions usually increase by 2.5% or headline RPI, whichever is higher - meaning the government faces paying out billions more in benefits and pensions.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.
However the high inflation figure will be a reminder of the inflationary risk, observers say.
Increased food and energy prices this year have been blamed for taking inflation beyond the government's 2% target.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.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.
However the high inflation figure will be a reminder of the inflationary risk, observers say. Inflation was likely to get as low as 1% by Autumn 2009, and could turn negative if oil prices continued to fall, said Jonathan Loynes, Chief European Economist at Capital Economics.
"CPI was once again rather worse than expected in September, but this will be the peak in inflation," he said.
"The key issue now is just how far and fast it will drop back as the food and energy effects which have pushed it up so sharply over the last year finally fade or go into reverse."
The annual rate of inflation for energy and other household bills reached 15% - the highest since 1989 - the Office for National Statistics said.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.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.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.