- UK inflation surged to a 10-year high in October, as household energy bills rocketed, data showed Wednesday.
- Consumer prices rose by 4.2%, up from a 3.1% increase in September and beating the 3.9% gain expected.
- The figures will bolster expectations that the Bank of England will raise interest rates next month.
British inflation surged to a 10-year high last month, as household energy bills rocketed, according to data on Wednesday that will bolster expectations that the Bank of England will raise interest rates next month.
Consumer prices rose by 4.2% in annual terms in October, leaping from a 3.1% increase in September. Both the BoE and a Reuters poll of economists — none of whom had predicted such a big increase — had pointed to a reading of 3.9%.
“Today’s inflation data will reinforce the Bank of England’s resolve to act,” Yael Selfin, chief economist at KPMG UK, said.
The Office for National Statistics said household energy bills were the biggest driver of inflation following the lifting of a regulatory cap on bills last month, with gas prices paid by consumers up 28.1% in the year to October.
“A substantial winter surge in inflation remains probable with the rising cost of imported raw materials and higher energy prices likely to lift inflation to around 5% next year,” said Suren Thiru, head of economics at the British Chambers of Commerce.
The BoE is expected to become the first of the world’s major central banks to raise rates since the coronavirus pandemic swept the global economy, with investors and economists increasingly predicting that will happen on Dec. 16.
On Monday BoE Governor Andrew Bailey said he was “very uneasy” about the inflation outlook and that his vote to keep rates on hold earlier this month, which shocked financial markets, had been very close.
On Tuesday, data suggested Britain’s labor market was withstanding the end of the government’s job-protecting furlough scheme, a key factor for the BoE and its decision on rates.
There were signs in Wednesday’s data of further inflation pressure in the pipeline. Prices charged by factories rose by more than expected, up 8% compared with October 2020, the sharpest increase since 2011.
Manufacturers’ input costs jumped by 13%, the most since 2008, the ONS said.