Inflation accelerates to 41-year peak

Inflation has accelerated to the highest level for 41 years, driven by soaring energy, food and transport prices in a worsening cost-of-living crisis, official data showed Wednesday.

The Consumer Prices Index hit 11.1 per cent in October, reaching the highest level since 1981, the Office for National Statistics (ONS) said in a statement.

That compared with 10.1 per cent in September, which matched the level in July and was the highest in 40 years.

Domestic fuel bills rocketed further despite the UK government’s energy price freeze as the market faced fresh fallout from key producer Russia’s invasion of Ukraine.

The October figure beat market expectations of 10.7 percent and was higher than the Bank of England’s forecast peak.

“Rising gas and electricity prices drove headline inflation to its highest level for over 40 years, despite the Energy Price Guarantee,” said ONS chief economist Grant Fitzner.

Over the last year, gas prices have leapt by 130 per cent and electricity prices by 66 per cent, according to the ONS.

Food prices and transport costs also propelled inflation higher.

Runaway inflation comes despite Britain’s energy support, which sought to limit annual energy bills at an average of £2,500 per year.

The ONS said inflation would have risen to around 13.8 per cent in October had the government not intervened to limit the price of household energy bills.

Hurting those on the lowest incomes the most, prices of food and non-alcoholic beverages rose at the fastest rate since 1977, the ONS said.

Chancellor Jeremy Hunt, speaking on the eve of his key government budget, blamed Russian President Vladimir Putin’s war in Ukraine for spiking prices, as well as fallout from the pandemic.

“The aftershock of Covid and Putin’s invasion of Ukraine is driving up inflation in the UK and around the world,” Hunt said.

“This insidious tax is eating into pay cheques, household budgets and savings, while thwarting any chance of long-term economic growth.”

The Ukraine conflict has also sent inflation soaring to the highest level in decades worldwide, sparking economic turmoil and forcing major central banks to ramp up interest rates.

The Bank of England this month sprang its biggest interest rate hike since 1989 to combat sky-high inflation — and warned the UK economy may experience a record-long recession until mid-2024.

The BoE said it was lifting borrowing costs by 0.75 percentage points to three percent — the highest level since the 2008 global financial crisis — to cool UK inflation that it saw peaking at almost 11 percent.

Hunt added on Wednesday that “tough” decisions would be needed in Thursday’s budget to help the BoE meet its 2.0-percent inflation target.

“We cannot have long-term, sustainable growth with high inflation,” he said.

The ONS said low-income households were facing a bigger hit from inflation than the wealthiest as energy and food take up a bigger share of their spending.

The lowest-income households suffered an inflation rate of 11.9 per cent while top earners faced a 10.5 per cent rate, it said.