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| Version 3 | Version 4 |
|---|---|
| UK inflation rate increases to 3% | UK inflation rate increases to 3% |
| (40 minutes later) | |
| UK inflation jumped to an 11-year high of 3% in December, raising the prospect of more interest rate increases. | UK inflation jumped to an 11-year high of 3% in December, raising the prospect of more interest rate increases. |
| Official figures showed that higher fuel costs helped to push the Consumer Prices Index up from 2.7% in November. | Official figures showed that higher fuel costs helped to push the Consumer Prices Index up from 2.7% in November. |
| An increase had been expected following last week's shock rise in UK interest rates to 5.25%, but the rise was larger than analysts had forecast. | An increase had been expected following last week's shock rise in UK interest rates to 5.25%, but the rise was larger than analysts had forecast. |
| The Retail Prices Index, which includes mortgage interest payments, rose to 4.4% in December from 3.9%. | The Retail Prices Index, which includes mortgage interest payments, rose to 4.4% in December from 3.9%. |
| The RPI figure - which is often used as a basis for wage demands - is now at its highest level since 1991. | The RPI figure - which is often used as a basis for wage demands - is now at its highest level since 1991. |
| Reaction | Reaction |
| There remains the real risk that the Bank of England will hikes rates again James Knightley, ING Bank href="/1/hi/business/6266733.stm" class="">How UK inflation is measured | |
| "Now we know why the Bank of England raised interest rates last week," said Howard Archer, chief UK economist at Global Insight. | "Now we know why the Bank of England raised interest rates last week," said Howard Archer, chief UK economist at Global Insight. |
| "This is a pretty unhealthy report all round for the Bank of England to digest, fully justifying the immediate hike in interest rates." | "This is a pretty unhealthy report all round for the Bank of England to digest, fully justifying the immediate hike in interest rates." |
| Analysts said there was now strong chance of further interest rate rises. | Analysts said there was now strong chance of further interest rate rises. |
| "Given evidence suggesting that wage rises are picking up, there remains the real risk that the Bank of England will hikes rates again," said James Knightley, an economist at ING Bank. | "Given evidence suggesting that wage rises are picking up, there remains the real risk that the Bank of England will hikes rates again," said James Knightley, an economist at ING Bank. |
| "We would expect any move to come in the next two months." | "We would expect any move to come in the next two months." |
| Petrol costs | Petrol costs |
| The Office for National Statistics said the largest upward impact on prices in December came from transport costs. | The Office for National Statistics said the largest upward impact on prices in December came from transport costs. |
| HAVE YOUR SAY The higher gas bill has been the hardest thing to deal with in the last year Leah Ronaldson, Edinburgh Send us your comments These were lifted by rising petrol prices and the fuel duty increase unveiled by Gordon Brown in the pre-Budget report. | HAVE YOUR SAY The higher gas bill has been the hardest thing to deal with in the last year Leah Ronaldson, Edinburgh Send us your comments These were lifted by rising petrol prices and the fuel duty increase unveiled by Gordon Brown in the pre-Budget report. |
| The Bank of England is tasked with keeping CPI inflation at the government's target rate of 2%, but it has now exceeded this level for eight months in a row. | The Bank of England is tasked with keeping CPI inflation at the government's target rate of 2%, but it has now exceeded this level for eight months in a row. |
| If CPI inflation should rise above 3%, the Bank's governor Mervyn King would have to write a letter of explanation to the government - the first time since the Bank gained independence in 1997. | If CPI inflation should rise above 3%, the Bank's governor Mervyn King would have to write a letter of explanation to the government - the first time since the Bank gained independence in 1997. |
| "Given that the CPI is generally a lagging indicator, we can expect inflation in the UK to climb further in the short term, taking us well above the Bank's 2% target," said Martin Slaney, of GFT Global Markets. | "Given that the CPI is generally a lagging indicator, we can expect inflation in the UK to climb further in the short term, taking us well above the Bank's 2% target," said Martin Slaney, of GFT Global Markets. |
| "Although Bank of England governor Mervyn King will not be obliged to write that `Dear Chancellor' letter just yet, his pen will be poised." | "Although Bank of England governor Mervyn King will not be obliged to write that `Dear Chancellor' letter just yet, his pen will be poised." |