Food and fuel push up inflation as pound falls

A JUMP in food and fuel prices is expected to push the cost of living to its highest level since June 2014 when official figures are released tomorrow.

The Consumer Price Index (CPI) is forecast to reach 1.9 per cent in January, as inflation continues to build after rising to 1.6 per cent in December and 1.2 per cent in November.

Data released by the RAC at the beginning of this month showed fuel prices reached a two-year high last month, with petrol and diesel increasing by an average of two pence a litre at the pumps.

Ballooning import prices triggered by the Brexit-hit pound are also expected to bump up prices as companies pass on their soaring costs to consumers.

Howard Archer, chief UK and European economist at IHS Global Insight, has pencilled in inflation of 1.9 per cent for January but said some prices rises could be offset by a discounting drive from retailers. He said: “The upside for UK inflation in January may have been limited by a number of retailers engaging in aggressive discounting in the January sales after disappointing sales at the end of the year.”

Economist Victoria Clarke said the shortage of vegetables after extreme weather ravaged crops across Europe might have also pushed up prices at the supermarket checkout.

Alan Clarke, head of European fixed income strategy at Scotiabank, said the drought and snow storms that hammered the Mediterranean vegetable harvest could also increase processed food prices, including veggie burgers. The ONS said sterling weakness was a factor in rising food prices but not the sole contributor.