Inflation hits highest level in 10 years

British inflation surged to a 10-year high last month as household energy bills rocketed, according to data released today (17), hitting a rate more than double the government’s target.

As per data by Office for National Statistics (ONS), the consumer prices index measure of annual inflation rose to 4.2 per cent in October, up from 3.1 per cent in September – the highest rate since November 2011.

The higher inflation rates are reportedly driven by household gas and electricity prices. The figure was higher than forecasted by City economists, with the annual inflation rate more than double the 2 per cent target set by the government for the Bank of England.

The ONS data comes after the energy regulator, Ofgem, lifted its cap on household bills after wholesale gas prices soared to record levels as economies around the world emerged from lockdown and supplies of Russian gas to Europe failed to meet demand.

Apart from higher energy prices, the inflation was also driven by higher prices in restaurants and hotels after a partial removal of a VAT cut for the hospitality sector.

The Bank of England says it may have to raise interest rates in the “coming months” to tackle the surging prices.

Grant Fitzner, chief economist at the ONS, said, “Inflation rose steeply in October to its highest rate in nearly a decade.

“This was driven by increased household energy bills due to the price cap hike, a rise in the cost of second-hand cars and fuel as well as higher prices in restaurants and hotels.

“Costs of goods produced by factories and the price of raw materials have also risen substantially and are now at their highest rates for at least 10 years.”