UK inflation has jumped more than expected and to its highest level in almost a decade, increasing pressure on the Bank of England to raise interest rates.
The annual rate of the consumer price index rose to 4.2 per cent last month, up from 3.1 per cent in September and the fastest pace since November 2011, according to figures from the Office for National Statistics.
Inflation rose to more than double the 2 per cent BoE target and was higher than the 3.9 per cent forecast by economists polled by Reuters.
ONS chief economist Grant Fitzner said that Inflation climbed “steeply” in October, driven by increased household energy bills due to the rise in the price cap that the regulator applied from the start of the month to reflect higher gas prices. Inflation was propelled by a rise in the cost of second-hand cars and fuel as well as higher prices in restaurants and hotels.
Core inflation, which excludes more volatile energy and food, rose more than expected to 3.4 per cent from 2.9 per cent in September.
“Many countries are experiencing higher inflation as we recover from Covid, and we know people are facing pressures with the cost of living,” Chancellor Rishi Sunak said.
The BoE expects consumer prices to rise to 4.5 per cent in November and to peak at around 5 per cent in April as a result of high energy prices and strong demand that bumps against supply chain disruptions.
Yael Selfin, chief economist at KPMG UK, said that “confirmation that inflation is moving further away from its 2 per cent target may seal the Bank of England’s resolve to raise rates in December, following the strong labour data released this week”.
The UK is not the only country where household incomes are threatened by rising prices. Last week, the US reported that consumer prices in October rose at the fastest pace in three decades. Final data released on Wednesday are expected to confirm that eurozone inflation last month rose at the fastest pace in 13 years.
The cost of goods produced by factories and the price of raw materials have also risen substantially, with the annual rate of the producer input prices jumping to 13 per cent in October, from 11.4 per cent in the previous month and the highest for at least 10 years.