SOARING energy bills helped keep inflation firmly above its target in September, official figures showed yesterday.
Prices increased by 2.7 per cent in the 12-month period, above the Bank of England’s two per cent and the same rate as in the year to August, according to the Office for National Statistics’ consumer prices index (CPI).
The cost of living, measured by the retail prices index, came in at 2.5 per cent, easing slightly from the 2.6 per cent in the year to August.
Airfares were a major riser, up 10.7 per cent on the year in part as airlines unwound the cheap deals on offer over the 2012 Olympics and the surrounding months. Household bills also shot up with gas prices up 8.3 per cent and electricity up 8.1 per cent.
Foods like fruit rose in price by 11.3 per cent and meat increased 5.2 per cent. But there was some relief, with motor fuel prices down 1.6 per cent and, in part due to a tax cut, a 0.7 per cent fall in beer prices.
Former Bank of England policymaker Andrew Sentance warned inflation could soon accelerate further.
“Services prices rose 3.4 per cent in the past 12 months and since 1997 they have increased by 3.7 per cent a year on average,” said Sentance, now a senior economic adviser at PwC.
“Unless services inflation falls back significantly, CPI inflation will continue to run above target and we could see another inflation spike above three per cent if energy and commodity prices pick up again,” he added.
That three per cent mark is key as it would force Bank of England governor Mark Carney to write a letter to the chancellor explaining why the monetary policy committee has missed its target by a one percentage point margin.