Inflation expected to edge back up

Five poundsInflation will edge up as consumers start to feel the heat of rising energy prices, food costs and university tuition fees.

Experts predict that the consumer price index (CPI) for October will be 2.3%, having been at a 34-month low of 2.2% in September, with some predicting the rate could go as high as 2.5%.

Inflation has fallen back from a three-year high of 5.2% in September 2011 but there are fears the rate could reach 3.5% by the middle of next year.

A near trebling of university tuition fees after the Government lifted the cap to £9,000 this year is likely to have pushed up the latest CPI figure, and the October statistics will also include the first of the energy price rises ahead of winter.

SSE was the first energy company to increase its prices, hitting its customers with an average 9% increase on October 15. But the full extent of energy price rises by all of the "big six" energy suppliers apart from E.ON will not be felt until later in the year, with npower and British Gas raising their prices this month.

Howard Archer, chief European and UK economist at IHS Global Insight, predicted inflation would edge up to 2.4%.

He said food prices were also likely to have risen as a consequence of recent poor harvests overseas and very wet weather in the UK.

Philip Shaw, chief economist at Investec, said September's 34-month CPI low seemed as close as the Bank of England's Monetary Policy Committee would get to hitting its 2% target for quite some time and predicted official statistics would show consumer price inflation edged up to 2.5% in October and could be as high as 3.5% by mid-2013.

He also said that inflation had been pushed up by a small amount as more goods and services were liable for VAT.

Critics say the Bank of England's quantitative easing (QE) programme is adding to inflation while savers and pensioners also suffer from prolonged low interest rates.