Inflation expected to rise again

Consumers feeling the pinch during the weekly shop and at the petrol pumps are set to get more bad news as official figures are expected to confirm inflation has risen again.

The Consumer Prices Index (CPI), which stood at 3.3% last month, is forecast to hit 3.4%, well above the Bank of England's 2% target.

The expected monthly rise, to be announced by the Office for National Statistics, has been blamed on soaring fuel and utility bills, plus the VAT increase to 20%

However, the trend for rising inflation began in November 2009 with the pound's devaluation and has been fuelled by rising prices for commodities such as oil, coffee, sugar, cotton and wheat.

Investec economist Philip Shaw has warned CPI could hit 3.5% for December and will continue to rise throughout 2011, adding: "It seems likely that inflation will exceed the 4% level later in the year and there seems a growing risk that the targeted measure will remain in excess of 2% through 2012."

Barclays Capital experts were even more gloomy in their December forecast, predicting CPI will hit 3.6%, and also offered little good news for consumers for 2011: "We expect CPI inflation to rise to around twice the target rate during the first quarter.

"We expect inflation to remain well above target throughout 2011 before dropping slightly below target at the start of 2012."

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