00:02:09
ITN
Food costs keep inflation above target
Food costs keep inflation above target
Inflation remains above the Bank of England target of 2.1 per cent, raising fears it will duck an anticipated cut in interest rates next month.Rising food prices were a large factor in the latest figures - food prices grew at their fastest annual rate since April last year.Lower household fuel bills were not enough to offset the hammering at the supermarket till and the cost of living remaining above the Bank's target for the third successive month in December as analysts expected.As inflation figures come under more pressure as household energy bills are expected to rise, the MPC may choose to keep interest rates on hold again next month.Global Insight's chief UK economist Howard Archer said policymakers were "far from out of the inflation woods yet".Mr Archer, who expects interest rates to fall to 4.5 per cent by the end of the year, said: "Rising utility bills, elevated food prices and a weaker pound will exert significant upward pressure over the coming months."He added: "The pace and extent of further rate cuts will therefore depend critically on inflationary pressures being contained by ongoing wage moderation and by companies' pricing power being diluted by slowing growth."The headline Retail Prices Index inflation benchmark, which includes mortgage payments, fell from 4.3 per cent to 4 per cent in December. This was due to lenders passing on last month's interest rate cut, while borrowing costs remained unchanged the previous year.© Independent Television News Limited 2008. All rights reserved.
ITN | January 15, 2008
