October price inflation figures
The Consumer Prices Index (CPI) measure of price inflation for the year to October 2010 shows a small rise from 3.1% to 3.2%.
Economists and analysts had expected the figure to remain unchanged this month, at 3.1%. Prices have gone up as a result of higher fuel prices.
The Retail Prices Index (RPI), a different measure of price inflation which includes mortgage and housing costs, fell slightly for the year to October. RPI was 4.5%, down from 4.6% the previous month.
Contained within these inflation figures is a slowing down of food price inflation.
Because CPI remains more than 1% above the government target of 2%, the Bank of England governor Mervyn King had to write another letter to the Chancellor, George Osborne.
In this letter, King points to “a number of temporary influences,”. The Bank is also looking ahead to the VAT rise from 17.5% to 20% in January, as this will temporarily push up price inflation when it is introduced to the system.
This marginal change in both measures of price inflation should change very little in terms of monetary policy or the prospect for interest rate increases.
The outlook for inflation remains uncertain, although the Bank appears to be backing the view that spare capacity in the economy will drive down price inflation over the longer term.