According to figures released a day before finance minister Jeremy Hunt’s announcement of tax increases and budget cuts to manage price growth, soaring household energy bills and food prices propelled British inflation to its highest level in 41 years.
In the year leading up to October 2022, consumer prices increased 11.1%, the biggest since October 1981 and a significant increase from September’s 10.1%, the Office of National Statistics reported on Wednesday.
Reuters conducted a survey of economists and found that most anticipated an inflation increase to 10.7 percent.
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The ONS reported that inflation would have increased to roughly 13.8% in October if the government had not intervened to cap annual family energy bills at 2,500 pounds ($2,960).
In response to the data, Hunt, scheduled to unveil a new budget on Thursday, stated that “difficult but necessary” measures were required to combat growing costs.
“It is our duty to help the Bank of England in their mission to return inflation to target by acting responsibly with the nation’s finances,” he said in a statement.
According to analysts, the increase kept the pressure on the BoE to continue rising interest rates.
Mike Bell, a global market strategist at J.P. Morgan Asset Management, stated, “These numbers sit uncomfortably alongside the message sent from the Bank of England … when it argued that only modestly higher interest rates would be necessary to bring inflation back towards its 2% target.
“We are not so convinced.”
Inflationary pressures from Britain’s tight labor market had been underestimated, and employees were expected to demand higher wages in the future to balance inflation, according to Bell, who predicted the BoE would raise rates to a top of 4.5% from the current 3.0%.
In predictions published this month, the BoE had anticipated inflation of 10.9% for October.
James Smith, an economist at ING, stated that there were indications that inflation was reaching its peak and that he expected the Bank Rate to peak at approximately 4%, somewhat below current market pricing.
In the 12 months leading up to October, food and non-alcoholic beverage costs increased at the quickest rate since 1977, according to the ONS.
The core rate of inflation, which excludes food, energy, and other volatile components, remained stable at 6.5% despite the increase in the headline amount.
The ONS said that households with the lowest incomes, where energy and food account for a more significant proportion of expenditures, experienced an inflation rate of 11.9%. In comparison, households with the highest incomes experienced an inflation rate of 10.5%.
The producer price statistics indicated that there was still inflationary pressure on the horizon but also hinted at a probable deceleration.
The rate of increase in raw materials and energy expenses for manufacturers was the smallest since March, but at 19.2%, the increase was still enormous by historical standards.
In the 12 months leading up to October, factory prices increased by 14.8%, the smallest increase since April.
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