The Office for National Statistics reported on Tuesday that British inflation declined to an almost-three-year low last month. The slowdown of inflation was mainly driven by surging electricity and gas prices during the year prior to September 2011. Annual CPI in the United Kingdom added 2.2% the last month, compared to a reading of 2.5% in the preceding month. Economists, however, predicted that inflation would be equal to 2.3%, hence the actual reading was lower than expected. Consumer price inflation, however, may accelerate soon, since four biggest suppliers of energy in Britain have announced that they would rise prices by 6-9%.
‘There is still some room for further policy easing but the stickiness of inflation in the face of such a large activity shock to the economy is a reminder to policy makers that this scope is not unlimited. They will need to revise up their short-term outlook for inflation,' said an economist at BNP Paribas SA in London, David Tinsley.