UK inflation tops 11% to hit its highest level since 1981 as food and energy prices soar
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- UK inflation jumped to a fresh four-decade high of 11.1% in October, from 10.1% the month before.
- It would have been 13.8% if the UK government hadn't capped household power bills, the ONS said.
- The Bank of England has hiked interest rates to their highest since 2008 to try to cool inflation.
The rate of inflation in the UK accelerated in October, hitting a new four-decade high, as steep rises in energy and food prices drove up Brits' cost of living.
Consumer prices were up 11.1% on the level a year ago — the highest rate of inflation since October 1981, the Office of National Statistics said Wednesday. It's also an increase on September's 10.1% inflation print, and above the 10.7% forecast in a Reuters poll of economists.
Energy prices were the biggest driver in pushing up inflation last month, the ONS said. It noted the rate would have jumped to 13.8%, if the UK government hadn't capped household power bills at 2,500 pounds ($2,967) from October 1.
"As an indicative estimate, without the implementation of the EPG, electricity, gas and other fuels prices would have risen by nearly 75% between September and October 2022 (instead of 25%)," the ONS said.
Food costs helped fuel the sharp run-up, with food price inflation hitting a 45-year high of 16.5%, the official data showed.
Earlier in November, the Bank of England hiked interest rates by 75 basis points for the first time in over three decades to try to cool red-hot inflation rates. The UK central bank has now raised rates eight times since February to reach 3%, the highest level since the 2008 financial crisis.
"Inflation is over five times the BoE's 2% target and adds pressure on the UK central bank to raise interest rates again in the December meeting," said Fiona Cincotta, senior financial markets analyst at City Index.
"The market expects the BoE to raise rates by 50 basis points taking the benchmark rate to 3.5%," she added.
Jeremy Hunt, the UK's finance minister, has flagged he will make spending cuts in a new government budget expected to be announced Thursday. That could help the BoE in its mission, the Chancellor of the Exchequer suggested.
"This insidious tax is eating into pay cheques, household budgets and savings, while thwarting any chance of long-term economic growth," Hunt said, referring to the coronavirus pandemic and the fallout from Russia's war in Ukraine.
"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 added.
"That requires some tough but necessary decisions on tax and spending to help balance the books."
London's FTSE 100 stock index climbed 0.04% after the release of inflation data, while the British pound was up 0.15% at $1.1884 in choppy action.
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