UK consumer inflation rises to 4.5 pct

[September 13, 2011]  LONDON (AP) -- Official figures show that higher utility and clothing costs pushed Britain's consumer prices up to 4.5 percent in the year to August from 4.4 percent the month before, but economists expressed hope that the rate could begin falling within months.

Tuesday's figures from the Office for National Statistics show inflation running above the official target of 2 percent for the 21st consecutive month.

"The headline inflation rate may still be heading for about 5 percent in September/October," said Jonathan Loynes, chief European economist at Capital Economics.

"After that though, food and energy effects should start to fade quite fast," said Loynes, who looks for inflation to fall back near to the target by the end of 2012.

The Bank of England has refrained from raising interest rates from their current all-time low of 0.5 percent because it believes the inflation surge will reverse next year and because of concerns over the slow pace of growth in the economy. The British economy grew by just 0.2 percent in the second quarter from the previous three month period.

Instead, analysts now think it is more likely that the Bank's Monetary Policy Committee will move later this year to pump more money into the economy by restarting a program of asset purchases, which paused in December 2009.

[Associated Press]

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