UK inflation accelerates to 41-year peak

British 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 percent in October, reaching the highest level since 1981, the Office for National Statistics (ONS) said in a statement. That compared with 10.1 percent 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 percent and electricity prices by 66 percent, 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.

Finance minister 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.

Earlier, British inflation jumped back above 10 percent in September on soaring food prices, official data showed last month, with the country gripped by a cost-of-living crisis bedevilling the government.

The Consumer Prices Index accelerated to 10.1 percent on an annual basis, up from 9.9 percent in August, the Office for National Statistics said in a statement. The September rate matched the level in July and is the highest in 40 years as a result also of sky-high energy bills.

"I understand that families across the country are struggling with rising prices and higher energy bills," Britain's new finance minister Jeremy Hunt said in a separate statement.

"This government will prioritise help for the most vulnerable while delivering wider economic stability and driving long-term growth that will help everyone."

The government has been rocked by chaos in markets in the wake a budget that pledged tax cuts that would have been funded by state debt. Capital Economics noted that the BoE could hike its rate by as much as one percentage point to 3.25 percent at its next meeting in November.

Victoria Scholar, head of investment at Interactive Investor, said inflation was "the most pressing economic problem facing the Bank of England as well as the government. \

"Without price stability, the costof-living crisis will continue to weigh on the economy by squeezing household budgets and dampening business margins."