CONSUMER price inflation rocketed higher in October, due to tuition fee hikes and booming food prices, data revealed yesterday.
The jump defied Bank of England expectations that inflation would fall towards its two per cent target.
This jump might have been a factor in the Bank’s decision to hold fire on more quantitative easing (QE) policy last week, analysts suggested, as Bank rate-setters were shown early figures before their meeting.
Inflation soared to 2.7 per cent on the consumer price index (CPI) the Office for National Statistics (ONS) said yesterday, up from 2.2 per cent in September, pinning the 0.47 percentage point leap on tuition fee hikes.
University fees were 19.7 per cent higher than a year ago, according to ONS figures, which take into account not only new first years facing a higher cap, but also second and third years paying fees at the old rate, and unaffected postgraduate students. This big rise made up 0.32 percentage points of the total jump in the rate.
The next biggest effect came from climbing food and drink prices, which made up 0.16 percentage points of the overall change.
Analysts speculated that these big jumps in inflation measures helped convince Bank rate-setters to hold off on extra QE in last week’s meeting. “Yesterday’s figures are likely to have been a key driver in the vote not to sanction further QE this month,” said Philip Shaw at Investec.
Analysts said the rise adds to indications that inflation would remain stubbornly above the Bank’s two per cent target well into the future. Chris Crowe at Barclays said inflation would hit 3.4 per cent in the summer of 2013.