U.K. Inflation Seen Holding at Seven-Month High in December

U.K. inflation probably held at the highest rate since May as energy prices climbed, heaping pressure on households as the economy stalls.

Consumer prices rose an annual 2.7 percent in December from a year earlier, the same as in November and October, according to the median forecast of 36 economists in a Bloomberg News survey. The Office for National Statistics will publish the data at 9:30 a.m. in London on Jan. 15.

The recovery is struggling to gain traction as the crisis in Europe continues and the government drives through the biggest fiscal squeeze since World War II. The National Institute of Economic and Social Research forecast the economy shrank 0.3 percent in the fourth quarter after the London Olympics “artificially” boosted growth in the third.

“It looks likely that consumer price inflation will hit 3 percent in the early months of 2013,” Howard Archer, an economist at IHS Global Insight in London, said in a research note. “This will obviously not be good news for consumers’ purchasing power and growth prospects.”

The retail-price index, a benchmark for wage negotiations and the inflation-linked bond market, held at 3 percent, according to the median estimate in a separate poll. Core inflation, which excludes alcohol, tobacco, food and energy costs, stayed at 2.6 percent, another survey showed.

A price increase by energy supplier SSE Plc affected the November inflation rate, with increases by companies from RWE Npower Plc to Centrica Plc, the owner of British Gas, due to be included in the December index.

The Bank of England held its target for bond purchases at 375 billion pounds ($605 billion) yesterday as policy makers assessed the impact of their Funding for Lending Scheme.

“There is little sign yet that the FLS is having a large enough impact to offset other headwinds in the economy, which include high inflation, widespread job insecurity and high debt,” Chris Williamson, chief economist at Markit Economics, said in a research note. “The available data point to the U.K. economy having contracted slightly in the fourth quarter.”

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