"The ‘high inflation, low growth' dilemma will probably once again be the main topic of the Inflation Report"
- Joost Beaumont, an economist at ABN Amro Bank
Inflation rate in the U.K. held at the highest rate since May last month, as crude oil costs rose. According to the Office for National Statistics, nation's consumer prices rose 2.7% from a year earlier, matching analysts' expectations. Despite a surge in oil costs, a big rise in the prices of alcohol and tobacco also propped up consumer prices. Alcohol and tobacco prices were up 8.5% on the year, but were also up 4.3% from December. On Wednesday, the Bank of England is going to publish its new economic projections, after saying on Tuesday that inflation may accelerate in the coming months and stay above its goal for the next two years. Current inflation target, set by the BoE is 2%.
"The ‘high inflation, low growth' dilemma will probably once again be the main topic of the Inflation Report," Joost Beaumont, an economist at ABN Amro Bank in Amsterdam, said in an e-mailed statement. "We expect the BOE to stay on the sidelines. The euro crisis is likely to remain contained and we see the U.K. economy gradually regaining some traction."
"We know that not all the rises in utility prices have yet entered the index. There's still some more to come which will have an upward effect on inflation," Phil Gooding from the ONS said after the report.
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