UK inflation accelerates to 41-year peak
BRITISH inflation has jumped to a 41-year high on soaring energy and food bills in a worsening cost-ofliving crisis, data showed yesterday on the eve of a key budget.
The Consumer Prices Index (CPI) hit 11.1% in October, reaching the highest level since 1981, the Office for National Statistics (ONS) said in a statement.
That compared with 10.1% in September, which matched the level in July and had already been the highest in 40 years.
Domestic fuel bills rocketed again despite the U.K. government’s energy price freeze as the market faced more fallout from key producer Russia’s invasion of Ukraine.
The October figure beat market expectations of 10.7% and was higher than the Bank of England’s (BoE) 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 leaped by 130% and electricity prices by 66%, according to the ONS.
Runaway inflation comes despite state energy support, which sought to limit annual energy bills to an average of 2,500 pounds ($2,984) per year.
Treasury chief Jeremy Hunt blamed Russian President Vladimir Putin’s war in Ukraine for spiking prices, as well as the easing of pandemic curbs.
‘TOUGH’ DECISIONS
Hunt is expected today to hike taxes and slash spending, despite the cost-ofliving squeeze, as Prime Minister Rishi Sunak attempts to fix economic chaos wrought by predecessor Liz Truss.
“The aftershock of COVID-19 and Putin’s invasion of Ukraine is driving up inflation in the U.K. and around the world,” Hunt said yesterday.
“This ... 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.
That has forced major central banks to raise interest rates, risking the prospect of recession as higher borrowing costs hurt businesses and consumers.
The (BoE) this month sprang its biggest rate hike since 1989 to combat skyhigh inflation – and warned the U.K. economy may experience a record-long recession until the mid of 2024.
The BoE lifted borrowing costs by 0.75% points to 3.0% – the highest since the 2008 global financial crisis – to cool U.K. inflation that it saw peaking at almost 11%.
Hunt added that ‘tough’ decisions would be needed in today’s budget to help the BoE meet its 2.0% inflation target.
“We cannot have long-term, sustainable growth with high inflation,” he said.
The U.K. has meanwhile been blighted by strikes this year, as workers protest over wages that have failed to keep pace with surging inflation.
The retail prices index (RPI) – an inflation measure that includes mortgage interest payments and is used by trade unions and employers when negotiating wage increases – rocketed to 14.2% in October from 12.6% in September, data showed yesterday.