U.K. Inflation Reaches Fastest Since at Least 1997

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The high cost of energy is taking it's toll around the world. Energy conservation and the development of alternate, renewable energy sources and increased drilling is critical to the future of America and the world. The Obamacrats are anti Oil and Gas Industry and if they get in power this situation will only get worse.

U.K. Inflation Reaches Fastest Since at Least 1997

By Jennifer Ryan

Oct. 14 (Bloomberg) -- U.K. inflation quickened to the fastest pace in at least 11 years in September, squeezing consumers with higher living costs as the financial market crisis curbed the availability of credit.

Prices rose 5.2 percent from a year earlier, the most since records began in 1997, the Office for National Statistics said in London today. The median forecast of 32 economists in a Bloomberg News survey was 5 percent. Inflation has now exceeded the Bank of England's 2 percent target for a year.

The central bank cut the benchmark interest rate last week by half a point to 4.5 percent after an emergency meeting. The crisis of confidence in the banking system and lower commodity prices have raised the risk that inflation may slow below the target, policy maker Andrew Sentance said yesterday.

``The weakness in the economy will be more than enough to bring inflation to target,'' said Nick Kounis, an economist at Fortis in Amsterdam and a former U.K. Treasury official. ``Today's reading isn't a barrier to further rate cuts. The bank is more worried about inflation undershooting the target now.''

The pound was little changed at $1.7502 after the report. Stocks recovered for a second day after the U.K. government bailed out banks including HBOS Plc and similar measures were adopted in Europe and the U.S.

Monthly Gains

Consumer prices rose 0.5 percent on the month, the statistics office said. The annual increase in prices was led by electricity and gas costs, culture, recreation, clothing and footwear. Food inflation slowed for the first time since March to 12.7 percent, from 14.5 percent in August.

``The focus of central banks has shifted towards the outlook for growth, and thus the likely decline in inflation going forward,'' said George Buckley, an economist at Deutsche Bank AG in London. ``Current CPI readings are of markedly less importance than they were.''

Oil prices have fallen 45 percent from a record in July as the prospect of a global recession crimps demand for fuel. High energy costs have lifted Britons' utility bills this year, feeding faster inflation.

Sentance said yesterday inflation ``could quite conceivably undershoot the target for a while,'' and that ``we can now be much more confident than we were a few months ago that inflation will come back to the 2 percent target.''

He also said it is ``more likely than not that we will see a fall in gross domestic product for the third and fourth quarters of this year.''

Home Sales

U.K. home sales fell in September to the lowest level in at least three decades, led by London, as the financial crisis prompted price drops across the nation, the Royal Institution of Chartered Surveyors said today. The global crisis has sapped confidence among investors and consumers and pushed mortgage lending to the lowest since at least 1999.

So-called core inflation, which strips out costs of food, energy, tobacco and alcoholic beverages, still accelerated to 2.2 percent, the fastest pace since at least 1997.

Retail price inflation, the cost-of-living measure often used in wage negotiations, accelerated to 5 percent. Excluding mortgage interest payments, it reached 5.5 percent, the fastest pace since 1992.

All but one of 22 economists in a Bloomberg survey predict another interest-rate cut from the current 4.5 percent before the end of the year.