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Families warned not to get too comfotrable with inflation levels
INFLATION could begin to rise again next year despite a dip in the cost of living last month, economists warned today.
Smaller rises for utility bills and clothing prices compared with last year helped the consumer price index (CPI) rate of inflation edge down to 2.5 per cent in August from 2.6 per cent in July, the Office for National Statistics (ONS) said.
But the rising cost of fuel at the pumps maintained upward pressure on inflation in August and will add to fears that the rate will not fall as rapidly as the Bank of England hopes, tightening the squeeze on households.
Economists also warned droughts in the United States are likely to mean higher food prices while more energy price hikes are in the pipeline this autumn.
Higher university tuition fees will also add to inflation next month.
Victoria Clarke, economist at Investec, said inflation could rise back up towards 3 per cent by the middle of next year.
She said: ''From here we do expect inflation to moderate a touch further.
''However, we should caution that we do expect this trend to turn upwards again soon, with sources of upward pressure emerging over the months ahead including university tuition fees, higher food prices following the recent US droughts and higher pump fuel prices too.''
The figures were published amid reports the Government is considering linking hikes in benefit payments to average pay rather than inflation. September's CPI figure is typically used to determine the following April's rise in the basic state pension.