Inflation 'Eases' To Signal Lower Benefit Rises
The rate of inflation is tipped to have dropped to its lowest level for nearly three years last month in a development that would be bad news for benefit claimants and those taking the basic state pension.
The Government uses September's Consumer Prices Index (CPI) measure of inflation to calculate increases to such payments the following April.
Many experts believe CPI will have eased towards the Bank of England's 2% target - signalling a far weaker rise to benefit cheques than had been the case in the same month last year when CPI stood at 5.2%.
A final decision is made by ministers in December.
While the slowing pace in living costs will be welcome in the wider economy, there are fears the respite may only be brief as energy bills and food costs start to rise.
It is known so far that customers of British Gas, Scottish Power, Npower and SSE will be paying more for their household bills this winter.
Howard Archer, chief economist at IHS Global Insight, said the September inflation figures could mark the trough in recent falls.
He said: "Consumer price inflation could well be pushed back above 2.5% by the move back up in petrol prices, some utility bills rising in October and November and likely higher food prices largely due to poor harvests pushing up grain prices."
Philip Shaw, chief economist at Investec Securities, warned CPI would hit 3% by mid-2013.
He said: "A near tripling in university tuition fees should push CPI inflation up in October, with further food and energy price increases likely to add to that rising trend."
A rising inflation outlook could hold policymakers back from launching more quantitative easing (QE) to boost money supply in the economy for fear of stoking inflation further.
Many economists believe the Bank of England will pump more cash into the economy in November, but rising price pressures may dampen QE expectations.