December 12, 2006	Tuesday	Ziqa'ad 20, 1427

LONDON, Dec 11: Britain's inflation rate in November is set to rise to its highest since comparable records began almost a decade ago as utility price rises continue to feed into the index.

Inflation has been above the Bank of England's 2 per cent target since May, largely due to higher energy costs.

Although oil prices have fallen from their summer peaks, quarterly bills for gas and electricity means it takes months for lower wholesale prices to be felt fully by consumers.

After holding steady at 2.4 per cent in October, economists polled by Reuters expect inflation will rise to 2.6 per cent in November. This would be the highest since the series began in early 1997.

“Utilities' prices, which have contributed about a third of the acceleration in inflation this year, continue to reflect the residual effects of the latest wave of price hikes,” said Alan Clarke, economist at BNP Paribas.

Petrol price base effects are also likely to put upward pressure on inflation. Although petrol prices fell by 0.7 per cent last month, they fell by a much sharper 3.5 per cent in November last year, adding 0.1 per cent to the overall index, according to Capital Economics.

An overshoot of the 2 per cent target by more than a percentage point would force the Bank of England governor Mervyn King to write a letter to Chancellor of the Exchequer Gordon Brown explaining why inflation was so far off target.—Reuters