INFLATION is expected to have held steady despite rises in the price of oil exerting significant upward pressure, an economist has predicted.
The Office for National Statistics releases figures on Tuesday, which are set to show that the consumer price inflation rate remained at 2.6 per cent in August after hitting a 31-month low of 2.4 per cent in June.
Chief economist for IHS Global Insight Howard Archer said while there was a marked rise in oil prices from July, further pressure from a poor grain harvest in the United States had yet to show up as price rises in shops.
Hard-pressed retailers were still also discounting heavily in an effort to create an increase in footfall.
He said inflation would likely resist a downward trend to hover around the 2.5 per cent mark in the medium term, as colder-weather energy bills hit doorsteps in October.
“However, we now believe that consumer-price inflation is unlikely to dip below 2 per cent until well into 2013,” he said.
On Wednesday, the Bank of England’s monetary policy committee (MPC) will release the minutes of its September meeting, when it once again made no changes to monetary policy after extending its quantitative easing (QE) programme by £50 billion in July, taking the total to £375bn.
Archer said it will be interesting to see if the September minutes reveal any noticeable change in the dynamics within the committee following the replacement of arch-dove Adam Posen by Ian McCafferty, who took up the role on 1 September.
McCafferty, previously the chief economic adviser to the Confederation of British Industry, has indicated that he wants to see more evidence of the state of the economy before deciding whether or not more stimulus is needed.
Archer expects the September meeting minutes will reveal that the MPC voted unanimously to keep the current QE plans unchanged and to leave interest rates at 0.5 per cent.