AFP – Britain’s annual inflation rate jumped more than expected in October to back above the Bank of England’s (BoE) target as households and businesses faced higher energy bills, official data showed yesterday.
The Consumer Prices Index (CPI) reached 2.3 per cent from a three-year low of 1.7 per cent in the 12 months to September, the Office for National Statistics (ONS) said in a statement.
CPI was last at 2.3 per cent in April, the ONS added in a statement, while analysts’ consensus had been for the rate to climb back to 2.2 per cent.
The BoE target stands at two per cent.
“Inflation rose… as the increase in the energy price cap meant higher costs for gas and electricity compared with a fall at the same time last year,” ONS chief economist Grant Fitzner said of October’s data.
Britain’s energy regulator Ofgem sets a price cap quarterly that suppliers can charge customers.
The latest increase in October was 10 per cent but this is expected to drop markedly in January according to forecasts.
The regulator had cited rising prices on international energy markets owing to increasing geopolitical tensions, and extreme weather events driving competition for gas, as the reasons behind the sharp rise. “We know that families across Britain are still struggling with the cost of living,” senior Treasury official Darren Jones said in reaction to yesterday’s inflation reading, adding that the Labour government needed to do more to help.
Analysts said despite prices rising faster than expected, the BoE remained on course to keep cutting British interest rates.
“But it lends some support… that the bank will skip the December meeting and cut rates only gradually, by 25 basis points in February and at every other policy meeting until rates reach 3.5 per cent in early 2026,” deputy chief United Kingdom (UK) economist at Capital Economics research group Ruth Gregory forecasted.
The central bank earlier this month trimmed borrowing costs by 25 basis points to 4.75 per cent.
Following its decision, the BoE added that a maiden budget from Britain’s Labour government in October, featuring tax rises and increased borrowing, would boost growth but also lift inflation.
Major central banks started this year to cut interest rates that had been hiked in efforts to tame inflation, which had soared following the end of Covid-19 lockdowns and geopolitical tensions. In August, the BoE reduced it key rate for the first time since early 2020, from a 16-year high of 5.25 per cent as UK inflation returned to normal levels. UK inflation had soared to above 11 per cent in October 2022, the highest level in more than four decades, as the current wars cut energy and food supplies, sending prices soaring. Companies faced supply constraints also as they struggled to return to the pre-Covid rhythm of working.
