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Inflation Remains At 2.7 Per Cent

Inflation in the UK remained at 2.7 per cent in December 2012 following an unexpected rise in October, latest figures from the Office for National Statistics (ONS) show.

The ONS said there were both significant upward and downward pressures, with a rise in gas and electricity bills cited as the largest cause of static prices. According to the data, overall fuel prices are 4.6 per cent up on the year, with gas prices up by 5.2 per cent and electricity up 3.9 per cent.

Air fares provided the largest downward pressure, with prices rising at a far slower rate than during the same period in 2011.

The Consumer Prices Index (CPI) rate of inflation has remained well above the Bank of England’s 2 per cent target since November 2009. Inflation has now held at 2.7 per cent for three months in a row. In October 2012 it rose sharply from a 24-month low of 2.2 per cent in September. Inflation peaked at 5.2 per cent in September 2011.

The Retail Prices Index (RPI) rate of inflation also rose to 3.1 per cent in December, up from 3 per cent, pushed up by rising housing and utility costs.

The elderly are the most likely to be affected by the static inflation, according to the Alliance Trust, as they spending the largest share of their household budget on utilities – particularly during the current cold snap.

The CPI measure has been used for the indexation of state welfare such as benefits, tax credits and public service pension since April 2011. However, as announced in the Chancellor’s Autumn Statement, certain working-age benefits and tax credits will increase by only 1 per cent from April 2013 for the next three years.

A Treasury spokeswoman told the BBC that the Government had taken action to help households with the cost of living by increasing the tax-free personal allowance and by cancelling the planned January fuel duty increase.

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