Inflation has surged to its highest level in two years and is on track to pass 2 per cent in the next few months. The consumer prices index climbed above expectations to 1.2 per cent in November from 0.9 per cent the previous month. The last time it was higher that this was in October 2014. The fall in the pound since the Brexit vote in June this year and rising oil prices have largely been held responsible for the increase. “The main source of inflationary pressure in the UK is rising import costs,” said Kallum Pickering, at Berenberg Bank.
The Office for National Statistics has found that products with high “import intensity” have been the main causes of inflation change since the Brexit vote. In May, the month before the EU referendum, inflation was 0.3 per cent.
Alan Clarke, UK economist at Scotiabank, expects consumer prices to increase by 2.1 per cent in January, the first time that inflation will have been above the Bank of England’s 2 per cent target since November 2013. Mark Carney, the Governor of the Bank of England, announced last week that households suffered their first “lost decade” in 150 years, with real incomes yet to rise above pre-crisis levels. Input prices rose by 12.9 per cent in November, up from 12.4 per cent the month before. “Imported goods and metals contributed 7.8 percentage points to the overall growth of 12.9 per cent,” the ONS said.