The latest price inflation figures, for the twelve months to September 2011, have been published this morning.
They show price inflation as measured by the Consumer Prices Index (CPI) at 5.2%, up from 4.5% the previous month. This was higher than the 5% rate of inflation anticipated by many economists.
The Retail Prices Index (RPI) measure of inflation currently stands at 5.6%. This is the highest RPI has been for over 20 years. The last time RPI was higher than 5.6% was in June 1991 when it was at 5.8%.
Energy prices, which are currently a hot political topic, were behind much of this monthly rise in inflation. Clothing placed some downwards pressure on inflation this month.
Inflation figures for the year to September are important because they are used to calculate increases to various state benefits, including the state pension. This is the first year that CPI inflation is being used to calculate these increases, rather than the often faster rising RPI measure.
These latest inflation figures are unlikely to discourage the Bank of England from their current course of action.
Whilst the Bank has an official inflation target of 2% for CPI, at the moment they seem to be more concerned with maintaining the febrile economic recovery rather than keeping a lid on price inflation in the short-term.
The Bank has previously said that they expected inflation to peak at around 5%. Assuming this forecast was correct, the September inflation figures could represent the top of the inflation cycle, before they start to fall back again towards or even below target.
Savers and investors should keep a close eye on inflation and the associated forecasts, as these have an important impact on overall financial planning.
Photo credit: Flickr/Martin Bamford
