Autumn Statement 2016: Inflation
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Inflation in Britain climbed to the highest level in over five in and a half years in November, remaining above the Bank of England's 2% target for the ninth consecutive month, after breaking through the threshold for the first time in three years in March.

According to data released by the Office for National Statistics (ONS) on Tuesday (12 December), inflation as measured by the Consumer Price Index (CPI) rose 3.1% year-on-year last month, compared with the 3% growth recorded in October and September.

The figure was the highest level on record since March 2012 and will force Bank of England Governor Mark Carney to write a letter to the Chancellor explaining why price growth is so far above the BoE's 2% target.

"When Mark Carney pens his letter to the chancellor he'll have a ready answer as to why inflation is so high - we're still seeing the effect of the weaker pound filtering through to prices," said Ben Brettell, senior economist at Hargreaves Lansdown.

"Given Carney and colleagues raised interest rates last month, he'll also be able to point to the fact that, for once, he's doing something about it too."

The ONS said the cost of air fares, fuel and computer games were the main drivers of the increase.

The pound's sharp decline in the wake of the Brexit vote has pushed up inflation, as it has driven import prices higher, eroding living standards for British workers as wages fail to keep pace.

On a monthly basis, inflation climbed 0.3%, after rising 0.1% in the previous month, beating analysts' expectations for a 0.2% increase.

Meanwhile, core inflation, which excludes volatile items such as energy prices, was unchanged at the 2.7% rate recorded in the previous two months, which was the highest on record since 2011.

The latest report is in line with the forecast issued by the BoE last month, when it said it expected CPI inflation to peak at 3.2% this year, before falling to 2.4% and 2.2% in 2018 and 2019 respectively.

"We are probably close to the peak for inflation now, but it will only fall back gradually next year," said Andrew Sentance, senior economic adviser at PwC.

"That means price rises will continue to run ahead of pay growth in the first half of 2018 - continuing the squeeze on real incomes and consumer spending. That is likely to continue to act as a dampener on economic growth in the next few quarters.

The inflation data comes only a day before the release of the latest snapshot of Britain's labour market, which is expected to show average weekly earnings excluding bonuses only grew 2.2% year-on-year in October.

Economists have previously warned the squeeze on households was being exacerbated by subdued wage growth.

Data released yesterday (11 December), showed consumer spending in Britain fell for the third consecutive month in November as Black Friday price cuts failed to persuade shoppers to splash out on big-ticket items.

According to figures released by IHS Markit and Visa, spending fell 0.9% compared to a year earlier following a 2.1% drop in October.