Inflation likely to rise further over coming months

19th March 2013

Annual CPI inflation was 2.

8% in February 2013, up from 2.7% in January  Commenting on the inflation figures for February 2013 published today by the ONS, John Longworth, Director General of the British Chambers of Commerce (BCC), said: -The marginal increase in CPI inflation to 2.8% supports our view that inflation is likely to rise slightly over the coming months, before easing back towards the end of the year. This is reinforced by our latest economic survey of businesses who reported expectations of further price rises. -Against this weak economic backdrop, we urge the Chancellor to use his Budget to go all out to boost growth. We are calling on the government to introduce measures that stimulate exports, kick-start infrastructure projects and create a structure of business finance and an environment of enterprise to support growing businesses. David Kern, Chief Economist at the BCC said:   -The slight increase in February was largely as the markets expected, and follows a four month period of CPI inflation standing at 2.7%. The largest upward contribution came from gas and electricity bills, but this was partly offset by smaller price increases in food and soft drinks.   -The outlook for inflation over the remainder of this year is uncertain. Along with food price increases that are still in the pipeline, the main threat comes from the sharp fall in sterling since the start of the year. The downward pressures on sterling could intensify as many believe that Mark Carney, the next Governor of the Bank of England, is likely to favour a more expansionary monetary policy.   -Caution is needed before we embark on any policies likely to result in further declines in sterling and higher inflation. In recent years, persistent above target inflation has squeezed businesses and consumers and has been one of the main factors accounting for the slower growth than predicted by the OBR in 2010. The MPC must not give the impression that it is prepared to tolerate higher inflation in the foreseeable future. Any benefits to exports resulting from a further weakening in sterling are likely to be very small, while the damage to the domestic economy could be considerable.