THE TELEGRAPH: British consumers should prepare for lingering higher inflation, the Bank of England Governor has warned, as latest figures show a sharp jump in food prices.
Figures from the Office for National Statistics showed a 3.4pc increase in the cost of food over the last year, with fruit being 10pc more expensive. The last year also saw a sharp rise in the cost of travel, which climbed an average 7.8pc.
Mervyn King, the Bank's Governor, voiced surprise that prices are higher than he had expected in a letter of explanation to the Chancellor George Osborne. While the overall consumer prices edged down to 3.1pc from 3.2pc in June, it remains above the Bank's own 2pc target, and the small decline will do little to ease the fear of some economists that a high cost of living will undermine Britain's fragile recovery.
Mr King must write to the Treasury each month that inflation exceeds 3pc, and he said he is likely to have to send several more letters. Inflation will probably not return to target until the end of 2011, he said.
"Food price inflation has moved up strongly ... and that's perhaps a trend that's going to continue over the next 12 months," said Philip Shaw, an economist at Investec. >>> | Tuesday, August 17, 2010
