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Inflation in UK remains at May Highs

Economists had predicted earlier that inflation would dip to 2.6% during November

Economists had predicted earlier that inflation would dip to 2.6% during November

December 18, 2012 – Inflation in the United Kingdom remained at the same level last month, which was its highest since May. The rate confounded forecasters who thought it would ease back. Now the Bank of England might have less room to restart its quantitative easing to help support the sluggish economy.   On Tuesday, new data was released that showed the annual inflation for consumer prices held steady at 2.7% following a jump in October. The data will help reinforce the concerns the Bank of England has that price pressures could stay persistent and cause consumers to spend less.

Economists had predicted earlier that inflation would dip to 2.6% during November. Inflation, which peaked last year at 5.2%, has helped weigh on spending by consumers, hold the economy from recovering for the second recession over the past four years.

Gasoline prices have fallen in the UK, but not enough to help outweigh the increase in prices for electricity and gas in the home as well as for food.

One economist said he had been surprised by the inflation rate as he was expecting the price of utilities to have less impact.

In addition, the price inflation for annual services increased to 4.2%, the highest point in nearly a year. The Bank of England, in its forecast for the quarter last month, said inflation in Britain would be significantly higher for another 1 ½ years.

The projections by the Central Bank showed it would be until at least the second half of 2014 before the rate of inflation dropped below the target of 2%, which is nine months longer than the Central Bank had predicted as recently as August.

Because of the high inflation, some policymakers had refrained from approving more stimulus in November and at the start of December, the Central Bank voted down the request for additional government bond purchases.

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