–Repeats Item Transmitted At 1423 GMT; Altering Topic Coding

LONDON (MNI) – Inflation, on the key Consumer Price Index measure,
could well hit 5% or above in September.

In a Market News survey analysts’ median forecast for September CPI
was 4.9% on the year. Members of the Bank of England’s Monetary
Policy Committee have warned it could come in at 5% or more, with CPI
driven up by the timing of energy price hikes.

Back in September 2008, CPI hit 5.2% and this September’s data
could mark a thee year high.

MPC members have been quite explicit in warning that inflation
moved up last month, while expressing confidence it will fall back
fairly rapidly.

“I think there’s a very good chance that when the inflation numbers
… are published for September, CPI inflation will be above 5%,” BOE
Chief Economist Spencer Dale said in a Reuters interview.

Governor Mervyn King said after the MPC sanctioned a further stg75
billion in quantitative easing at its October meeting that inflation
“may well go above 5%. But that in our view is the peak and it will then
start falling and in the first few months of next year it will fall
quite rapidly.”

The timing of utility price hikes is one of the keys to how strong
the September inflation data will turn out to be.

The Office for National Statistics does not reveal exactly when it
collects the inflation data, but the convention is prices are collected
on the second or third Tuesday of each month. The second Tuesday falls
on September 13.

An ONS official told Market News that, because it is impossible in
to collect all the data on one day, in practice they are collected over
three days, which would include Wednesday September 14.

The major utility providers have hiked unveiled some steep price
hikes, and three of these look set to be included in the September CPI
data.

Scottish and Southern Electricity hiked gas prices by 18% and
electricity prices by 14% on September 14, and this hike should fall
into the September CPI. Other hikes that look set to impact the
September data come from British Gas and E.On.

Philip Rush, economist at Nomura, says the collective impact of
these utility price hikes will be some 44 basis points.

CPI stood at 4.5% in August, and all else being equal the utility
price hikes would push it very close to 5.0%. Rush, however, also sees
transport costs boosting CPI, through petrol and airfares, and Nomura’s
forecast is for a 5.2% outturn.

The consumer price data will be published at 0830 GMT Tuesday.

–London Bureau; Tel: +44107 862 7491; e-mail:ukeditorial@marketnews.com

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