UK inflation rises to 3.2 per cent in October

Britons were hit with another above-target hike in the cost of living last month as sharp rises in fuel prices sent inflation to 3.2%, official figures revealed today.

The increase in the Consumer Prices Index (CPI) - up from 3.1% in September - has forced Bank of England Governor Mervyn King to write another letter to the Chancellor explaining why inflation is so far above the 2% target.

Soaring costs at the petrol pumps were largely behind the CPI increase following the Government's fuel duty rise on October 1, according to the Office for National Statistics (ONS) data.

Mr King has now had to pen four letters in a row to the Chancellor.

The Bank boss has to publish an open letter if CPI is more than 1% above the 2% target and thereafter every three months if it fails to drop back.

CPI is now back up to the level seen in June having remained stubbornly above target since November last year.

And there is expected to be further pain to come for households, with the Bank warning in its latest forecast report that higher bills and the impending VAT rise could see CPI spike to 3.5% over the coming months

The ONS said petrol prices rose by 2.1p a litre between September and October, while beer, wine and tobacco were also more expensive.

Big increases in computer games bought on the high street also drove a record rise in inflation for recreation and culture goods.

But there was some relief on food bills as shoppers were helped by lower vegetable and meat prices, with pork in particular cheaper due to healthy stock levels, said the ONS.

Property price falls sent the Retail Prices Index (RPI) measure of inflation, which includes housing costs, down to 4.5% in October from 4.6% in September - its lowest level since March.

House prices have been falling in recent months, while they were rising this time last year.

Mr King said: "CPI inflation is expected to remain above target, and at a somewhat higher level than expected three months ago, for a period of a year or so.

"Indeed, over the next few months the inflation rate might rise further."

January's impending rise in VAT to 20%, as well as higher fuel costs, energy bills and the impact of a weaker pound are set to drive inflation even higher.

The Bank predicted in its quarterly report last week that CPI could spike to 3.5% over the coming months.

But the Bank Governor said slack in the economy after such a deep recession would eventually outweigh these inflationary pressures.

He told the Chancellor: "The Monetary Policy Committee's central view remains that spare capacity within companies and in the labour market will continue to put downward pressure on inflation.

"As the temporary effects of VAT increases and higher import prices dissipate, inflation is expected to fall back towards the target."

His letter comes after official figures showed Consumer Prices Index (CPI) inflation rose to 3.2% last month from 3.1% in September.

Mr King has to publish an open letter if CPI is more than 1% above the 2% target and thereafter every three months if it fails to drop back.

He has now had to pen four letters in a row to the Chancellor after CPI has remained stubbornly above target since November last year.

Mr Osborne said he noted the Bank's view that inflationary factors were temporary, but stressed the Monetary Policy Committee's remit "ensures vigilance on upside and downside risks".

Today's data from the Office for National Statistics (ONS) showed that soaring fuel costs were largely behind the CPI increase following the Government's fuel duty rise on October 1.

The ONS said petrol prices rose by 2.1p a litre between September and October, while beer, wine and tobacco were also more expensive.