Firms braced for ‘expensive year’ as inflation rises

By PETER RANSCOMBE
Published on 13/02/2013 00:00

ECONOMISTS have warned that high oil and utility prices are expected to keep inflation high this year as the Bank of England prepares to deliver its quarterly report this morning.

ECONOMISTS have warned that high oil and utility prices are expected to keep inflation high this year as the Bank of England prepares to deliver its quarterly report this morning.

Analysts predict that rising crude prices will push inflation up to 3 per
cent in the coming months and keep it at that level all year.

The forecasts came despite official figures from the Office for National Statistics (ONS) yesterday showing that the consumer prices index (CPI) measure of inflation remained static at 2.7 per cent during January. CPI has remained at the same level for four months, the longest period in which it has stayed unchanged.

The retail prices index (RPI), which takes into account housing costs, rose to 3.3 per cent in January from 3.1 per cent in December.

Howard Archer, chief UK economist at IHG Global Insight, said: “The February inflation report will leave the door open to more quantitative easing.

“Once again, the Bank of England will likely have the dismal task of raising its CPI forecasts and cutting its gross domestic product (GDP) growth projections.

“This has been the depressing trend for some considerable time now.”

Colin Edwards, an economist at the Centre for Economics & Business Research (CEBR), added: “With the effects of increased tuition fees set to persist throughout much of 2013 – combined with elevated food prices and rising utility costs – inflation will struggle to come down significantly this year, pointing to 2013 becoming a more expensive year than the Bank expected.”