Rise in UK inflation rates after eight months

18/11/2009

Official figures revealed yesterday show that a key measure of UK inflation has risen for the first time since February this year.

The Consumer price index climbed to 1.5 per cent in October from 1.1 per cent in September.

Meanwhile the Retail Prices Index (RPI) inflation measure, which includes mortgage interest payments and housing costs, rose to -0.8 per cent from -1.4 per cent.

The Guardian reports that although average petrol prices slipped 0.8p a litre over the month, it was a much smaller fall than the slide seen last year, adding to inflationary pressure.

The Bank of England also commented that inflation will probably rise after the temporary reduction in VAT ends in January, although inflation is then expected to fall back again.

Debt management company EuroDebt commented that "Though average wages have gone up by 1.8%, it was announced that nearly half of employers are looking to freeze pay increases in 2010.

Inflation is being held down by low mortgage rates, but this may well change next year and many consumers will start seeing promotional rates come to an end and sizeable increases in their monthly payments.

The government is also looking to raise minimum payments on credit cards. For example, if the average households’ unsecured debt is over £21,000, for people using credit then increasing the month payment from 2-3 per cent to 5 per cent will increase expenditure for a financially struggling household by at least £420.

This may increase the number of Debt Management Plan'>Debt Management Plans (DMPs) and IVAs."

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