British inflation edges up to 1.3% in October from five-year low

London: British inflation edged up in October from a five-year low but prices are expected to weaken again soon, underscoring why the Bank of England is signalling it won’t start to raise interest rates until well into next year.

Consumer prices rose by an annual 1.3 per cent in October, in line with economists’ forecasts in a Reuters poll and slightly higher than September’s 1.2 per cent, the Office for National Statistics said on Tuesday.

The pound, which has weakened recently against the dollar as the prospect of rate hikes moved further away, rose slightly.

Many economists predict inflation will resume its decline soon, in part because of falling oil prices.

The Bank of England also said last week inflation might fall to below 1 per cent over the next six months and that it expects annual price growth to hit its target of 2 per cent only towards the end of its three-year outlook period.

Partly as a result, financial markets are now expecting the BoE to start raising rates only in late 2015 or possibly later.

The slump in inflation in recent months has given some respite to British households. Earnings rose by more than prices in September, even if only slightly.

Transport costs fell in October but by less than they did a year ago, pushing up the overall yearly inflation rate. Higher prices for computer games also contributed to inflation’s rise.

The ONS said food and non-alcoholic beverage prices fell 1.4 percent, marking the longest run of declines for those goods since 2000 as supermarkets engage in a price war and global food costs fall.

Core inflation held steady at 1.5 per cent in October.

The ONS said factory gate prices fell 0.5 per cent, indicating a lack of inflation pressure, and input prices fell by 8.4 per cent, the biggest decline since September 2009.

Separate ONS data showed house prices in Britain rose 12.1 per cent in yearly terms in September, compared with an increase of 11.7 per cent in August. Other, more up-to-date surveys have shown the rapid pace of house price growth starting to cool.

In London, property prices rose by 18.8 per cent in September, slowing from an increase of 19.6 per cent in August.