Published: Wed, November 13, 2019
Markets | By Otis Pena

Food prices spike Oct retail inflation to 4.62%

Food prices spike Oct retail inflation to 4.62%

Annual consumer price inflation was 1.5% in October, slowing from 1.7% a month before and below consensus, according to FXStreet, of 1.6%.

This could mean good news for state pensioners, who are set to receive a 3.9% increase next April under the triple lock system, which guarantees a minimum increase in the state pension each year. "It was 3.99 percent in September this year and 3.38 percent in October 2018".

An ONS spokesperson said: "A fall in utility prices due to a lowering of the energy price cap helped ease inflation in October".

These effects were partially offset by clothing and footwear prices, which rose by 1% as stores failed to repeat the discounts seen a year earlier.

Cheaper gas and electricity pushed United Kingdom inflation to its lowest rate in nearly three years last month, bringing respite for Prime Minister Boris Johnson after two days of disappointing data.

The lack of headline inflation may also reinforce the increasingly dovish tilt at the Bank of England, where two officials broke ranks to argue for interest rates to be lowered this month.

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Significantly, the data indicated that retail inflation level has breached the medium-term target for Consumer Price Index (CPI) inflation of 4 per cent. RPI was last lower in October 2016.

The UK's headline inflation rate fell to its lowest level in almost three years in October, according to figures released by the Office for National Statistics on Wednesday.

David Cheetham, chief market analyst at XTB, agreed that the decrease will push calls for the cut but time is not on the side of the MPC.

London performed the worst, with house prices down 0.4%, followed by the east of England, with prices falling 0.2%.

Analysts now believe the dip in inflation might prompt the Bank of England to cut interest rates given that households will have more spending power ahead of Christmas and next month's General Election.

However, leading United Kingdom economist at Pantheon Macroeconomics, Samuel Tombs, believes that inflation should reach two per cent in the second half of next year which should reduce the incentive to slash interest rates.

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