Inflation up to 4.5% in August

Consumer Prices Index (CPI) inflation rose from 4.4% in July to 4.5 in August, announced the Office of National Statistics (ONS) yesterday.

Clothing and footwear had seen the biggest rises in price, 3.7% up on July’s figures. Petrol and heating costs also saw increases.

Recreation, including the prices of computer games and consoles, saw prices fall.

The Bank of England’s target rate of 2% therefore continued to look an irrelevance as inflation, according to some economists, is set to hit 5% before the end of 2011.

Greg Bell, Skipton Business Finance’s Managing Director, had predicted in June that inflation was to reach 4.5% and possibly peak at 5% by the year end.

The rise in VAT to 20% at the start of the year, together with food and oil price hikes seen earlier in the year, are said by the Bank to be factors in the rises in inflation that were out of its control. It also expects inflation to drop rapidly in 2012, before getting back under control and below 2% within the next two years.