Inflation down to three-year low

Despite the fall in inflation, gas and electricity rises are expected to push it higher again

Despite the fall in inflation, gas and electricity rises are expected to push it higher again

First published in National News by

Inflation has fallen to its lowest level for nearly three years last month, but energy price hikes are expected to put household finances under pressure once more. The Office for National Statistics (ONS) said the Consumer Prices Index (CPI) fell to 2.2% in September, down from 2.5% in August and the lowest level since November 2009. While CPI is now less than half the 5.2% seen a year earlier, gas and electricity rises are expected to push it higher after four of the "big six" energy firms announced price rises. The ONS said CPI fell last month when hefty energy bill hikes seen in 2011 dropped out of the index. But with SSE, npower, British Gas and Scottish Power having announced moves to increase tariffs, CPI is expected to start rising once more after a year of falls. Rising fuel prices also put upward pressure on CPI last month, when petrol rose by 3.9p a litre between August and September compared with a fall of 0.3p a year ago, according to the ONS. Experts fear rising food prices will also push inflation back up. The latest figures showed the Retail Prices Index (RPI), which includes housing costs, also eased back last month, to 2.6% from 2.9% in August. Last month's inflation fall will come as bad news for basic state pensioners and those on benefits, as the Government uses September's CPI figure to calculate their payment increases the following April. The Treasury said September's fall would bring "welcome relief to the budgets of families and businesses". It added it would announce its final decision on pension and benefit increases in December. Economist Vicky Redwood at Capital Economics said while inflation had fallen close to the Government's 2% target, the decrease was likely to be "the last for a while". However, she still expects CPI to fall below 2% in the coming months as wider economic pressures drag inflation lower. Howard Archer, chief economist at IHS Global Insight, said the September fall in inflation has given the Bank of England room to take further economy-boosting measures through quantitative easing (QE). He expects the Bank to increase QE by 50 billion to 425 billion as it seeks to support recovery.

Comments

Post a comment

Remember you are personally responsible for what you post on this site and must abide by our site terms. Do not post anything that is false, abusive or malicious. If you wish to complain, please use the ‘report this post’ link.

Send us your news, pictures and videos

Most read stories

Local Info

Enter your postcode, town or place name

About cookies

We want you to enjoy your visit to our website. That's why we use cookies to enhance your experience. By staying on our website you agree to our use of cookies. Find out more about the cookies we use.

I agree