Factory-gate inflation rate slows

Factory-gate inflation rate slows

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The rate of factory-gate inflation slowed unexpectedly last month, official figures show

The rate of factory-gate inflation slowed unexpectedly last month, official figures have shown.

The Office for National Statistics (ONS) said the output price index for manufactured goods slowed to 3.9% from 4% in October. Economists had expected an increase to 4.1%.

The decrease is down to a smaller year-on-year increase in petroleum prices, the ONS said.

The figures will provide some relief to the Bank of England, which has been surprised by stubbornly high inflation in recent months, leading to calls from one policymaker to raise rates.

Last month, consumer price inflation increased to 3.2%, still well above the Bank’s 2% target.

The Monetary Policy Committee believes the rate of inflation will increase towards the end of the year and is not likely to ease back until late next year.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “The data supports the view that the Bank of England is likely to keep interest rates down at 0.5% until at least the final months of 2011.

“Nevertheless, the suspicion remains that the Bank will be reluctant to re-engage in quantitative easing unless there is a very sharp slowdown in economic activity in the early months of 2011.”

There has been no input price data available as the ONS delayed publication until next week due to potential errors.

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