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UK Inflation remains constant in November

Official data has shown that there was no change in UK consumer prices inflation last month as it remains at 2.7%. According the Office for National Statistics; Cereals, fruit, bread and energy bills saw the most rapid increase in prices, whilst petrol prices fell 3p a litre to £1.35 and diesel dropped 1.5p to £1.42 a litre. Carpets, beer and plane ticket prices also saw a decrease in November from October.

The consumer prices index (CPI) Inflation struck a 34-month low in September 2012 at 2.2%, but recoiled back to 2.7% in October. It has exceeded the Bank of England’s 2% target for over three years now and was at over 3% for 29 months running until May 2012.

Hikes in energy costs and food prices set to kick in during December and January could mean that consumer price inflation could be pushed up to 3% early in the New Year, peaking at 3.5% by mid-2013. It appears the economy will have to wait until the autumn of 2014 for inflation to fall back to its target according to expectations from the Bank.

It’s thought that the Bank may look for an alternative target with nominal gross domestic product (NGDP) deemed the most likely candidate. NGDP measures the economy's total economic output, without adjusting for rising prices.

Targeting NGDP rather than CPI inflation would allow the Bank to endure higher inflation during the current economic downturn, and would also force the Bank to seek an even faster rise in prices if it hadn’t met targets in previous months.

Some think that higher inflation while the economy remains down would help to make debts more controllable by depreciating their value, while encouraging people to spend more in fear of their savings being eaten away by rising prices.

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