Inflation stuck above target for 38th month

 
Ben Southwood
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CONSUMER prices grew faster than the Bank of England’s target rate for the 38th straight month over the year to January, data revealed yesterday.

The consumer prices index (CPI) grew 2.7 per cent between January 2012 and January 2013, the Office for National Statistics (ONS) said, the same rate as recorded in October, November and December. According to the ONS, the CPI has never before grown at a constant rate for four months in a row.

A jump of 8.5 per cent in alcohol and tobacco prices would have added 0.12 percentage points to the rate, the ONS said, but it was balanced out by downward contributions from clothing, footwear, housing and recreation and culture.

The retail prices index (RPI), which is linked to business rates, student loans, some tax thresholds, and some gilts, ticked up to 3.3 per cent, from 3.1 per cent in December.

The tax and prices index – essentially a modified RPI that takes into account the burden of tax – also climbed, from 2.7 per cent to 2.8 per cent.

But ongoing above-target inflation will not spur the Bank into tightening action, according to Nida Ali at the Item Club.

“There are no implications for monetary policy,” Ali said. “High inflation continues to be a result of external supply shocks, which the Bank has consistently ignored.”

She went on to predict that while today’s inflation report would forecast further above-target price growth, there would still be no Bank move, while the economy remains in such a gloomy state.