UK inflation rate unchanged at 2.7%

Winter energy bill here hikes helped keep the annual rate of inflation at 2.7% for the third month in a row, official figures showed Tuesday. The Office for National Statistics (ONS) said the Consumer Prices Index (CPI) was unchanged in December, although some economists predict it could rise to above 3pct by the summer. Price increases from four of the "big six" energy suppliers came into effect last month, dampening the impact of a fall in fuel costs. Meanwhile, Housing and household costs, which includes gas and electricity, rose 2% between November and December. But the rate of transport cost increases declined, with petrol prices falling by 2.8 pence per litre between November and December, compared with a fall of 1.1p a year earlier. Experts do not believe inflation will stay at 2.7% for long, with food inflation set to increase over the coming months after poor UK harvests due to last year's severe wet weather. However, there was some encouragement from the first drop in the rate of core inflation since July. Economists said: "In other words, sluggish consumer demand seems to have prompted retailers to discount a bit more heavily than last year over the festive period." A Treasury spokeswoman pointed out that inflation was nearly half of its 5. 2pct peak and that the Government had taken more action to help households with the cost of living, including a further increase in the tax-free personal allowance and cancelling the fuel duty increase that was planned for this month. Above-target inflation is proving a headache for Bank of England (UK central bank) policymakers as they weigh up mounting signs of economic gloom against faster increases in the cost of living. The economy is looking likely to have suffered a fresh contraction in the fourth quarter, according to some estimates, and could be heading for an unprecedented triple-dip recession. But the Bank may be reluctant to push the button for more quantitative easing (QE), printing money, given the outlook for inflation.