Inflation hits 3.7% in UK after record monthly increase

January 18, 2011 07:35

UK inflation has surged to its highest level since April 2010 as the rising cost of food and oil continued to hit consumers and businesses.

Graeme Wearden at


December’s unexpectedly high inflation rate put the Bank of England under even more pressure to raise interest rates, although City economists disagree about how soon borrowing costs will rise. It is also likely to lead to higher wage demands, as workers feel the effect of Britain’s austerity cutbacks and the VAT rise.

The consumer prices index rose to 3.7% in December, the Office for National Statistics reported. On a month-on-month basis, prices rose by 1% – the biggest increase on record.

The retail prices index, the wider inflationary measure used in pay negotiations, jumped to 4.8%, its highest rate since last July.

The pound gained half a cent against the dollar after the data was released, hitting an eight-week high of $1.6056. Alan Clarke, economist at BNP Paribas, predicted that the persistently strong inflation may push the Bank of England into raising rates earlier than previously thought.


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