Inflation rises as feared from 3.3% to 3.7% in December

The feared rise in inflation became a reality when the Consumer Price Index (CPI) increased from 3.3% to 3.7% in December. The Bank of England are coming under increasing pressure to raise interest rates to try and cut back on spending and reduce demand. The increase is blamed on rising costs of air transport, fuel, food and utility bills, and the recent VAT increase from 17.5% to 20% is likely to cause further rises.

1. Click here for full story
2. Who is most affected by inflation?
3. Stephanie Flanders - Inflation: Risks on both sides

Other stories

OPEC, the oil producing group, has said it is unlikely to increase output of oil despite the price of crude oil nearing $100 a barrel. A spokesman claims that supply to the market is sufficient and any output to reduce the price now looks unlikely.

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Bank of England keeps interest rates at 0.5%

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Good video with Declan Curry on why Interest Rates are important - check it out!

Food prices in Australia to rise because of floods

Food prices could rise by as much as 30% in Australia due to the floods in Queensland having a knock on effect to inflation.

Food shortages on goods like wheat, sugar, fruit and vegetables will push prices up, which could have a knock on effect globally.

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Economics stories in recent days

The terrible floods which have hit the Australian area of Queensland are likely to affect coal mines for months, which could push up the cost of electricity and steel.

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How Australian floods hit Europe

A couple of interesting articles to read.....

A range of really interesting economics stories have made the news over the last week or so. Here are just a couple which are well worth a read:

1. Rising price of sugar, cereal and oil prices drives global food prices to a record high in December - click here
2. The floods in Queensland, Australia, are likely to have an effect on the global steel industry. Three quarters of the areas coal fields are unable to operate and they usually export half the coal for use in making the metal. The price of coking coal from $225 to $253 a tonne in the last 3 weeks - click here

The VAT rise kicks in....

Today marks the day when the rate of VAT increases from 17.5% to 20%, leading to higher prices in a lot of goods and services we buy. Some goods remain exempt such as food and childrens clothes. The Coalition government argue that it will raise £12 billion which will help reduce the budget deficit whereas opponents argue that it is a regressive tax increase which punishes the poor and risks destabilising the weak recovery.

Here are some interesting articles from the BBC website which are well worth a look:

• VAT rises from 17.5% to 20%
• Is the VAT increase regressive?
• Who will pay for the rise in VAT?

Some notes for S3......

Demand
Supply