Painfully devalued UK

19 January 2010 By Ian Campbell

British prices were expected to spike and have done. The rise reflects a weak pound, higher taxes and loose global money. Inflation makes Britons poorer and makes the government pay more on its debt. The adjustment is painful, but the UK must live within its means.

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In December, UK consumer prices were 0.6 percent higher than in November and 2.9 percent higher than in December 2008, the UK's national statistics office reported on January 19. The one percentage point month jump in the annual inflation rate was a record. The inflation rate exceeded expectations, although a big increase had been expected following the 0.4 percent fall in consumer prices in December 2008.

UK gilt prices fell in response to the news and the pound dropped against the euro and retraced earlier gains against the dollar.

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