Petrol price running higher

UK inflation picked up pace in November, driven largely by higher petrol prices, official figures show. The consumer prices index (CPI) rose faster than expected to an annual rate of 1.9 %, compared with 1.5 % in October. November's rate was the highest since May this year. The inflation rate is forecast to rise further next year when the VAT discount ends. The retail prices index (RPI), which includes housing costs, rose to 0.3 % from a rate of -0.8 % in October. It is the first time the RPI index has been positive since January this year. Cheaper oil "By far the largest upward pressure affecting the change in the CPI annual rate came from transport," said the Office for National Statistics (ONS). "Within the transport category the largest upward effect came from fuels and lubricants," it added. "The large fall in 2008 was due to sharp falls in petrol and diesel prices, reflecting the falling price of crude oil in the latter half of 2008. " Average petrol prices rose by 2.9 p to 108.3 p a litre in November - compared with a record fall of 9.3 p this time last year. Petrol prices are dictated by the price of crude oil. This time last year prices were tumbling after reaching a record high in July 2008 , and they eventually reached a low in December. The Bank of England has a CPI target of 2 %. The Bank expects the index to rise above that in the new year after VAT reverts to 17.5 %. If CPI inflation rises above 3 % the Bank's governor, Mervyn King, must write to the chancellor to explain why. However, the Bank expects the inflation rate to slow later in the year. "November's consumer price figures will do little to ease recent concerns over the near-term inflation outlook" said Jonathan Loynes, economist at Capital Economics. "But we remain convinced that price pressures will remain subdued over the medium term." The ONS said that price rises in second-hand cars and clothes also pushed up inflation.