13 November 2012 Last updated at 06:29 ET
Phil Gooding, Office for National Statistics: “There are two main drivers behind the event, that comes from education and food”
The UK’s inflation rate rose sharply last month following an increase in tuition fees and food prices.
The Office for National Statistics (ONS) said the rate of Consumer Prices Index (CPI) inflation rose to 2.7% in October, up from 2.2% the month before.
The ONS said education costs rose by 19.1% last month after the government lifted the cap on university fees.
Food prices, especially vegetables, also rose after record wet weather earlier this year affected crop yields.
Confectionery prices also increased. The ONS said this was because a number of confectionery products had been reduced in size.
It said it treated this as a price increase in the inflation measures, as consumers were getting less for their money.
The Retail Prices Index (RPI) measure of inflation – which includes housing costs – rose to 3.2% from 2.6%.
The Treasury said the figures were “disappointing”.
Labour’s Shadow Treasury minister, Catherine McKinnell, said the increase was “worrying”.
When the Bank of England decided last week not to create more money to support the recovery, some of us wondered why they didn’t offer an explanation”
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The ONS also announced it would be introducing a new way of measuring inflation next March, the CPIH, which will include housing costs, something that is not reflected significantly in the currently favoured measure.
Energy prices
September’s CPI inflation rate was the lowest for almost three years, and was significant as it is the month on which rises in many benefits is based.
However, inflation had been expected to pick up from that point, partly because of a recently announced round of energy price rises that are expected to affect inflation figures in the coming months.
The ONS said SSE’s price rise of about 9%, which came into effect last month, was not included in the October inflation figures.
Ross Walker, UK economist at RBS, said the latest figures were slightly worse than predicted.
“They are a little bit disappointing, higher than expected, above the range,” he said. “Ironically, we had the tuition fee increases that are roughly what we expected and the surprise for us was the extent of the food price increase.”
The cap on charges for tuition fees was raised by the government from £3,375 to £9,000 a year.
The Bank of England is charged with keeping inflation close to 2%, something it has struggled to do in recent years, as the standard way of suppressing prices is to raise interest rates, which it does not want to risk during this period of weak economic activity.
Alan Clarke, economist at Scotia Bank, said that target remained elusive: “Where do we go from here? Onwards and upwards. Utility bill increases are on their way. We’ve also got the effect of the US drought and increased food prices to factor in.
“I don’t think we’re going to get anything like the 2% inflation target.”
The Bank of England’s quarterly inflation report will be published on Wednesday.
The rise in inflation may make it less likely that the Bank will provide further stimulus to the economy in the form of quantitative easing.
BBC News – Business
UK inflation rate rises to 2.7%
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UK inflation rate rises to 2.7%
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UK inflation rate rises to 2.7%
