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UK inflation inches higher as Christmas approaches

18 November 2020

Higher prices for clothing and footwear helped boost UK inflation to 0.7 per cent during October, latest data from the Office for National Statistics has revealed.

By Rory Palmer,

Reporter, Trustnet

Inflation rose during October despite the introduction of tiered levels of coronavirus restrictions, according to the Office for National Statistics (ONS), following a rise in prices for some consumer goods.

The ONS revealed that the consumer prices index (CPI) rate of inflation rose from 0.5 per cent in September to 0.7 per cent in October.

Price increases in the clothing, food and furniture sectors made up the largest upward contributors, but those were partially offset by downward contributions from recreation & culture and transport.

 
Source: ONS

Tom Stevenson, investment director for personal investing at Fidelity International, said while these prices are on an upwards path, inflation remain well below the Bank of England’s 2 per cent target.

He said: “Covid infections are still increasing and large swathes of the UK are under strict lockdown rules. This is not a recipe for inflation reaching its 2 per cent target any time soon.

“Further out, however, there is a light at the end of the tunnel in the form of a potential vaccine. Plus, the widely discussed shift to negative interest rates looks less likely now and this is good news for investors.

“The Bank of England has increased its quantitative easing programme to encourage consumer spending and investment and it should not keep its powder dry.”

Likewise, Jon Hudson, manager of the Premier UK Growth fund at Premier Miton Investors believes this will benefit the UK central banks.

He said: “While inflation has crept up in recent months, the low level continues to give the Bank of England ammunition to support the economy as and when required,” said Hudson.

“If the pound’s recent strength can continue, this will have a dampening effect on inflation, as goods and services become cheaper to import.”

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