UK inflation accelerated to an 11-year high of 3 percent in December consistent with the Bank of England’s decision to raise interest rate last week. Consumer Price Index shot up from 2.7 percent in November largely due to high fuel cost, triggering the prospect of a further rise of interest rates, which is now imminent. The rising inflation rate has not been shocking following the recent interest rate hike comprehensibly indicating towards high inflation rate.
Now speculations are high that the interest rate will be heading towards 5.5 percent in near future and a further hike as well cannot be ruled out owing to present belligerent mood of the Bank. The Bank had shocked the financial markets last week as it lifted interest rates to 5.25 percent.
Experts have indicated that the inflation rate will surge ahead than the present level due to higher utility bills and less generous accounting in the January sales compared with the last year. The Retail Price Index that includes mortgage interest payments, has shot up to 4.4 percent in December from 3.9 percent in the previous month, the highest since December 1991.
Last week’s decision to increase the interest rates aimed at controlling demand and checking inflation threat due to robust economic growth. Government officials are repeatedly saying that the inflation would be brought back to the desired level and to achieve this demand needs to be properly restrained. Along with the measures to curb demands, wage and price-setters should be consistent with the 2 percent CPI target in order to avoid further hike in inflation.
