Inflation jumps to 5-year high

INFLATION jumped to a five-year high in October, official figures are expected to show this week, as prices continue to surge following sterling’s Brexit plunge.

The increase to 3.1 per cent, expected to be announced on Tuesday, will trigger a letter from Bank of England governor Mark Carney to the Chancellor. He has to provide an explanation to Philip Hammond if inflation is more than a percentage point either side of the 2 per cent target.

Mr Carney nearly had to do this last month when inflation – as measured by the official Consumer Price Index – hit 3 per cent in September. Prices have soared thanks to the collapse in the value of the pound following last year’s Brexit vote.

But research company Capital Economics said in a note to clients: ‘We expect inflation to peak at 3.2 per cent in November, before easing in 2018 as the effects of sterling’s depreciation fade.’

Employment figures due out on Wednesday are set to show employment rose again but also that pay growth continues to fail to keep pace with inflation, meaning Britons are seeing real wage cuts.

Headline pay growth is set to edge back to 2.1 per cent, Capital Economics said.