Inflation increase 'will drop off'

The rise in inflation seen during November is likely to drop of quickly.

This is according to UK economist for Capital Economics Vicky Redwood, who explained that the 0.4 per cent increase in annual rate that occurred last month was largely due to petrol price inflation being ’stronger than expected’.

’It should only be a temporary thing,’ she remarked, adding that although the slight pick-up that occurred in core inflation is ’a bit more worrying’, it is unlikely that this will continue given the current ’spare capacity’ in the economy.

Ms Redwood observed that this will be an issue for those that are having inflationary pressures boosted by quantitative easing, but concerns should be eased by the middle of 2010, if inflation begins to fall again.

Consumer price index annual inflation was 1.9 per cent last month - up from 1.5 per cent in October, with transport being the largest upward pressure on the annual rate.ADNFCR-2318-ID-19519319-ADNFCR