UK inflation hits 41-year high of 11.1% as food and energy prices continue to soar

UK inflation hit a 41-year high of 11.1% annually in October, as household energy bills and food prices continued to soar.

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LONDON – UK inflation rose to a 41-year high of 11.1% in October, beating expectations as food, transport and energy prices continue to squeeze households and businesses.

Economists polled by Reuters had forecast a year-on-year rise in the consumer price index of 10.7%, and the October report marked an increase from A 40-year high of 10.1% was seen in September.

Despite launching the government’s Energy Price Guarantee program, the Office for National Statistics says the largest contribution comes from electricity, gas and other fuels.

“Consumer price inflation estimates according to the indicative model suggest that the most recent CPI rate would have been higher in October 1981, when the annual inflation rate estimate was 11.2%,” the ONS said. .

On a monthly basis, CPI increased 2% in October, in line with the annual CPI inflation rate for the July 2020 to 2021 period.

Overall, the cost of housing and home services, including energy bills, rose to an all-time high of 11.7% in the 12 months to October 2022, up from 9.3% in September 2022.

“In October 2022, on average, households are paying 88.9% more for electricity, gas and other fuels than they were paying a year ago,” the ONS said.

“Domestic gas prices posted the biggest increase, with prices in October 2022 more than double what they were a year earlier.”

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Food and non-alcoholic beverages also contributed significantly, up 16.4% in the 12 months to October, reaching the highest level since September 1977.

The country has to facerecord recessionfollow Bank of Englandwhile the government and central bank are making concerted efforts to tighten fiscal and monetary policies to curb inflation.

The Bank raises interest rate by 75 basis point earlier this month, the biggest increase in 33 years, bringing Bank Rates to 3%, but challenging the market’s valuation of future rate hikes.

Mike Bell, global markets strategist at JPMorgan Asset Management, said Wednesday’s numbers were “uncomfortable” along with the Bank of England’s message that a little higher interest rates are enough to bring inflation back to the 2% target.

“We don’t quite believe it. What has been consistently underestimated is inflationary pressures stemming from a tight labor market,” Bell said.

“Despite a slight drop in vacancies and employment in yesterday’s labor market report, wage growth continued to move higher. With headline inflation expected to continue to rise for several months,” he said. , workers can still claim more pay to protect disposable income.”

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Bell suggests that until there is evidence that weaker activity starts to affect wage demand, the Bank of England will have to keep raising interest rates and JPMorgan sees UK interest rates hitting levels. the highest is 4.5%.

All eyes are on financial statements

Finance Secretary Jeremy Hunt will issue a New financial report on Thursday and is expected to announce significant “stealth” tax hikes and spending cuts in a bid to fill a gap of more than £50 billion in the country’s public finances.

The government’s plan is expected to involve freezing various tax and subsidy thresholds as Hunt seeks to capitalize on rising inflation to boost Treasury coffers.

“While anything can happen tomorrow, if the government chooses to rely on inflation continuing to be as high as expected, then that’s it,” said Rachael Griffin, tax and financial planning expert. could be a safe bet.” Blanket.

“The Inflation fell in August seems like a stroke of luck, and it’s unlikely that falling inflation will materialize anytime soon.”

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