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With inflation rising to 3.1 per cent in November, families across Britain will find that their finances are tighter this Christmas than in years past.

The Office for National Statistics says toys were 6.1 per cent more expensive last month than a year ago. Food prices were up 4.4 per cent, while keeping the house warm and the lights on cost 6.4 per cent more than last year. And these seasonal items must be paid for using wages that, on average, are rising at an annual rate of just 2.2 per cent.

Richard Lim, chief executive of Retail Economics, said: “Food inflation is at a four-year high and, for many families, this is one of the most transparent indicators of living costs and often the catalyst to cut back on spending elsewhere.”

Thomas Sampson, assistant professor at the London School of Economics, said households will blame the Brexit vote for their tighter finances, since British prices have been rising faster than those in similar countries.

“Clearly, the main culprit is Brexit, and it probably accounts for 1.5 to 2 percentage points of inflation’s rise,” he said.

Among EU countries, only Estonia and Lithuania had higher rates of inflation than the UK in October, the most-recent month for which figures are available for the entire bloc.

The inflation rate in the eurozone has risen from 0.6 per cent to 1.5 per cent during the past year, while the UK inflation rate has gone up from 1.2 per cent to 3.1 per cent.

However, economists are now divided over when the squeeze on household incomes will ease.

The vast majority believe the 3.1 per cent inflation rate recorded in November marks a peak in inflation, arguing that sterling’s fall after last year’s EU referendum will not feed through to prices much further.

They say that in the coming months, the rapid increase in food and fuel prices at the start of 2017 will no longer inform year-on-year comparisons and allow the overall rate of inflation to fall — barring another surge in costs.

Allan Monks of JPMorgan said inflation in core goods, excluding food and fuel, slowed to 2.5 per cent from an apparent peak of 2.8 per cent in August.

“This is a sign that the most intense phase of currency pass-through is behind us,” he said.

But few economists expect inflation to fall rapidly.

The Treasury’s compilation of independent forecasters now expect prices will be 2.4 per cent higher in the final quarter of next year compared with the current quarter. The Bank of England’s Monetary Policy Committee agrees with the Treasury’s estimate.

Yael Selfin, chief economist at KPMG, said price rises will “moderate only gradually”, particularly after recent increases in oil prices have pushed the cost of crude to two-year highs, at more than $65 a barrel.

Ms Selfin added that this has implications for the rate-setting MPC: “The persistence of inflationary pressures and a tight labour market, despite the weaker economic environment, could see rates rise two to three times over the short-to-medium term.”

The MPC will announce its latest decision on interest rates on Thursday. While the committee was surprised by the extent of inflation’s rise earlier this year, its members are highly unlikely to raise interest rates again, just six weeks after the first rate rise in a decade.

Mark Carney, governor of the BoE, must write a letter to the chancellor if inflation exceeds the central bank’s 2 per cent target by more than 1 percentage point.

But the MPC had been expecting inflation to exceed 3 per cent at some point in the autumn, and having tightened monetary policy already, they will find the letter easy to draft.

“This Thursday’s policy meeting should not be a ‘live’ one,” said George Buckley, chief UK economist at Nomura.

Most economists believe a delicate balance of factors will govern prices during the next three years. They say the waning effect of higher import prices and Brexit-related uncertainties will be the main forces bearing down on price rises. But those factors will be offset by labour shortages, skill deficits and capacity limits in certain industries, which are likely to put upward pressure on wages and prices.

However, unforeseen events are highly likely to derail inflation from a gradual path back down to the BoE’s 2 per cent target. For example, Brexit talks or oil prices could shock the economy without warning, sending inflation significantly above or below target.

Even so, this year’s higher inflation is expected to hold back any growth in living standards, keeping average wages below 2008 levels until about 2025, when adjusted for inflation.

Torsten Bell, director of the Resolution Foundation, said the nudging up of prices in November does not change the underlying calculations.

“The new normal expectation for nominal wage growth is for it to rise to 3 per cent a year, creating 1 per cent annual real wage growth,” he said. “That is half the rate Britain achieved before the crisis.”

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