- Inflation in the UK rose to a 10-year high in October, when household energy bills rose sharply, data showed on Wednesday.
- Consumer prices rose by 4.2%, up from an increase of 3.1% in September, beating the expected increase of 3.9%.
- The figures will strengthen expectations that the Bank of England will raise interest rates next month.
UK inflation rose to a 10-year high last month as household energy bills skyrocketed, 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% year-on-year in October, a jump from a 3.1% increase in September. Both the BoE and a Reuters survey of economists – none of which had predicted such a large increase – had pointed to a reading of 3.9%.
“Today’s inflation data will strengthen the Bank of England’s willingness to act,” said Yael Selfin, chief economist at KPMG UK.
The Office for National Statistics said household energy bills were the biggest driver of inflation following the lifting of a statutory ceiling on bills last month, with gas prices paid by consumers rising 28.1% a year to October.
“A significant winter rise in inflation remains likely with rising costs on imported commodities and higher energy prices likely to lift inflation to around 5% next year,” said Suren Thiru, chief financial officer of the UK Chamber of Commerce.
The BoE is expected to be the first of the world’s major central banks to raise interest rates since the coronavirus pandemic swept across the global economy, with investors and economists increasingly predicting it will happen on 16 December.
On Monday, BoE Governor Andrew Bailey said he was “very uneasy” about the inflation outlook and that his vote to keep interest rates on hold earlier this month, which shocked financial markets, had been very close.
On Tuesday, data suggested that the UK labor market resisted the end of the government’s job protection leave scheme, a key factor for the BoE and its decision on rates.
There were signs in Wednesday’s data of further inflationary pressures in the pipeline. Factory prices rose more than expected, an increase of 8% compared to October 2020, the sharpest increase since 2011.
Manufacturers’ input costs increased by 13%, the most since 2008, ONS said.