UK inflation hits 3.1pc in near 6-year high

UK inflation reached a rate of 3.1 percent in November, intensifying households cost of living.

The Office for National Statistics (ONS) said in a recent report that the rate reached the highest in almost six years, thanks to airfares and computer games.

Following this news, Mark Carney, the governor of the Bank of England, will write a letter to Chancellor Philip Hammond with his plans on how to reduce the rate back down to the two percent target.

The last time Carney had to write to the chancellor was in December 2016, after inflation fell to 0.9 percent.

The latest letter from the governor of the Bank of England will be published in February 2018, when the Bank plans to release its quarterly Inflation Report.

The biggest contribution to the rate of inflation has been the fall in the value of the pound since the EU referendum.

November saw fuel and raw material bills 7.3 percent more than they were a year ago.  Factory gate prices were 2.8 percent in October and rose by 3 percent over the month.

“CPI inflation edged above 3% for the first time in nearly six years, with the price of computer games rising and airfares falling more slowly than this time last year. These upward pressures were partly offset by falling costs of computer equipment,” said Mike Prestwood, the ONS head of inflation.

“The prices of raw materials and goods leaving factories continued to increase as oil and petrol prices continued to rise. Annual rises in house prices and rents continued to slow, with London seeing house price falls for the second month running.”

Lucy O’Carroll, chief economist at Aberdeen Standard Investments, expects that inflation is close to its peak but households are still expected to feel the squeeze.

“It’s quite possible that it is now close to its peak. But some of the latest surveys suggest that service sector costs and prices are rising. Given how dominant services are in the economy, this could feed through to inflation overall,” she said.

“That means that further interest rate rises are definitely not off the table.”