The UK’s rate of inflation was unchanged yesterday but there are fears the respite may only be brief as energy prices continue to rise.
The Office for National Statistics said the Consumer Prices Index (CPI) was 2.7 per cent in November, with higher food costs and the first energy price hike by supplier SSE offset by a fall in fuel prices.
But with hikes by the other five energy providers set to come into force, analysts think CPI inflation will peak at 3.5 per cent by mid-2013.
The ONS said upward pressure from gas and electricity prices pushed housing and household services inflation up by 0.6 per cent.
Increases in the price of fruit, bread and cereals also pushed up the CPI rate, the ONS said.
But a fall in the cost of transport was the biggest factor which kept the rate of inflation down.
Petrol prices fell by 3p to £1.35 per litre, while diesel dropped 1.5p to £1.42 per litre in November, the ONS said.
The figures also show that the rate of the Retail Prices Index (RPI), which includes housing costs, fell to 3 per cent in November, down from 3.2 per cent in October as transport costs and mortgage interest payments fell.
Steady inflation will be a relief for policymakers after a shock jump in October.
The rate increased to 2.7 per cent from a three-year low of 2.2 per cent in September.
Any increase in inflation would fuel speculation that the Bank of England will hold off from taking further action under its economy-boosting quantitative easing (QE) programme.
A Treasury spokeswoman said: “Inflation is nearly half of the 5.2 per cent peak it reached last year.
“At the Autumn Statement, the Government took more action to help households with the cost of living including a further increase in the tax-free personal allowance and cancelling the fuel duty increase that was planned for January.”
Commenting on the latest figures, Danske Bank Chief Economist, Angela McGowan, who is based in Belfast, said:
“Although not excessively high, inflation is expected to remain slightly higher than the Bank of England’s two per cent target for most of 2013.
“However, the UK’s focus on an inflation target might well dwindle as next year progresses. The forthcoming Bank of England Governor, Mr. Mark Carney (who will take up his new position in July) has already hinted that there may be some merit in adopting a nominal Gross Domestic Product (GDP) target if the economy requires more stimulus. However, whilst such a policy change for the UK is far from a given, we should expect to see much greater policy discussion in 2013 around whether the UK should be restricting its monetary policy with an inflation target mandate, or consider adopting a target for nominal GDP.”