BRITISH underlying inflation stubbornly remained at a three year high point in November, official data showed yesterday, casting fresh doubts on the government's ability to rein in prices.
Underlying inflation, which excludes the cost of home loan repayments and is used by the government to set its inflation target, remained at 3.3 per cent over 12 months in November, after a 0.1 per cent month on month rise.
This remains the highest 12 monthly rate since September, 1993.
The inflation figures were in line with the predictions of analysts. But they make it still less likely that the Chancellor of the Exchequer, Mr Kenneth Clarke, will reach his target of reducing underlying inflation to 2.5 per cent or below by spring 1997, and keeping it at that level.
The main British employers' organisation, the Confederation of British Industry (CBI), predicted yesterday that underlying inflation would not fall to 2.5 per cent until the end of next year, and then would pick up to 2.9 per cent by the end of 1998.
The CBI's chief economic adviser Ms Kate Barker said that, in spite of a tightening of fiscal policy in Mr Clarke's 1997-98 budget presented in November, the overall cut in taxation would strengthen already robust consumer demand.
"If consumer spending rises in line with our forecasts, this may put upward pressure on underlying inflation over the next two years," she said in the CBI's latest report on the British economy.
Mr Clarke met Bank of England governor Mr Eddie George on Wednesday for their regular monthly meeting on monetary policy, but no rise in British interest rates was announced.
However, most economists expect Mr Clarke will have to give way to Mr George's call for another increase in the cost of borrowing "in due course" in the New Year.
Mr Clarke ordered a quarter point rise in the bank's base lending rate to 6 per cent at the end of October, but Mr George believes that the consumer sector, which is experiencing strong growth, is fuelling price pressures.
In October, annual underlying inflation had shot up to 3.3 per cent, from 2.9 per cent the month before.
