UK inflation hits 41-year excessive of 11.1% as meals and vitality costs proceed to soar

LONDON — U.Okay. inflation jumped to a 41-year excessive of 11.1% in October, exceeding expectations as meals, transport and vitality costs continued to squeeze households and companies.

Economists polled by Reuters had projected an annual enhance within the shopper value index of 10.7%, and October’s print marks a rise from the 40-year excessive of 10.1% seen in September.

Regardless of the introduction of the federal government’s Vitality Worth Assure program, the Workplace for Nationwide Statistics mentioned the biggest upward contributions got here from electrical energy, fuel and different fuels.

“Indicative modelled shopper value inflation estimates recommend that the CPI fee would have final been increased in October 1981, the place the estimate for the annual inflation fee was 11.2%,” the ONS mentioned.

On a month-to-month foundation, the CPI rose 2% in October, matching the annual CPI inflation fee between July 2020 and 2021.

General, the price of housing and family providers, which incorporates vitality payments, rose by an all-time excessive of 11.7% within the 12 months to October 2022, up from 9.3% in September 2022.

“In October 2022, households are paying, on common, 88.9% extra for his or her electrical energy, fuel, and different fuels than they had been paying a 12 months in the past,” the ONS mentioned.

“Home fuel costs have seen the biggest enhance, with costs in October 2022 being greater than double the worth a 12 months earlier.”

Meals and non-alcoholic drinks additionally contributed closely, rising by 16.4% within the 12 months to October to notch its highest annual fee since September 1977.

The nation faces its longest recession on report, in accordance with the Financial institution of England, whereas the federal government and central financial institution are trying to coordinate the tightening of fiscal and financial coverage with a view to rein in inflation.

The Financial institution raised rates of interest by 75 foundation factors earlier this month, its largest hike in 33 years, to take the Financial institution Fee to three%, however challenged the market’s pricing of future fee will increase.

Mike Bell, international market strategist at JPMorgan Asset Administration, mentioned Wednesday’s numbers sit “uncomfortably” alongside the Financial institution of England’s message that solely modestly increased rates of interest might be essential to convey inflation again towards its 2% goal.

“We’re not so satisfied. What has been underestimated persistently has been the inflationary pressures stemming from the tight labour market,” Bell mentioned.

“Though vacancies and employment eased marginally in yesterday’s labour market report, wage development continued to push increased. With headline inflation anticipated to remain elevated for some months but, staff should still ask for extra pay to guard disposable earnings.”

Bell steered that till proof emerges that weaker exercise is beginning to weigh on wage calls for, the Financial institution of England must preserve mountaineering, and JPMorgan sees U.Okay. charges peaking at 4.5%.

Finance Minister Jeremy Hunt will ship a brand new fiscal assertion on Thursday and is predicted to announce substantial “stealth” tax hikes and spending cuts in a bid to plug a £50 billion-plus gap within the nation’s public funds.

The federal government’s plan is predicted to contain a freezing of varied tax thresholds and allowances as Hunt appears to capitalize on rising inflation to spice up the Treasury’s coffers.

“Whereas something is feasible tomorrow, if the federal government opts to depend on persevering with excessive ranges of inflation as anticipated, it might seemingly be a protected guess,” mentioned Rachael Griffin, tax and monetary planning professional at Quilter.

“The dip in inflation seen again in August appears to have been a fluke, and it’s unlikely {that a} fall in inflation will materialise any time quickly.”