The UK’s rate of inflation will grow faster than previously predicted, according to new government forecasts.
The Consumer Price Index (CPI),the main measure of UK inflation, will rise to 2.3 per cent in 2017, according to new figures from the Office for Budget Responsibility.
The figures were released today alongside chancellor Philip Hammond’s first Autumn Statement. He also announced that GDP growth will be markedly lower and that the government would not eliminate the deficit as previously planned.
By the end of this Parliament, currently planned in 2020, inflation will be at 2.0 per cent, says the OBR.
Inflation is widely expected to rise owing to the secondary effects of the UK’s 23 June vote to leave the European Union. Since the vote the value of sterling against other currencies has plummeted, which will gradually bring price rises as importing goods becomes more expensive.
The forecast is broadly in line with others. An average of independent forecasters predicts that inflation in 2017 will rise to 2.6 per cent, before falling to 2.0 per cent by 2020.
The Bank of England (BoE) predicts that inflation will rise to 2.7 per cent next year.
Inflation is the measure of how much prices rise across an economy. The BoE is mandated to use monetary policy to keep inflation near but below two per cent.