The CPI inflation rate surged to 4.2% in the year to October – its highest level in almost a decade.
This means the inflation rate is now more than double the Bank of England’s 2% inflation target, and surely will lead to a base rate rise in December.
The Office for National Statistics reports that the rise has been fuelled by rising gas and electricity prices, by 18.8% and 28.1% respectively. The cost of second-hand cars also drove the inflation rate.
Sukhdeep Dhillon, senior economist at BNP Paribas Real Estate, said: “Following a brief period of respite for the markets inflation reached 4.2% in October, the highest rate in a decade.
“This increase has been underpinned by a sharp rise in utility prices, with consumers seeing first-hand the impact rising inflation will have on the cost of living and their everyday purchases.
“Businesses looking for an uneventful end to the year are likely to be out of luck with more uncertainty on the horizon.
“A tight labour market combined with increased concerns from the Bank of England about surging inflation only amplified the possibility of a Christmas rate rise.”
The UK unemployment rate stood at 4.3% in November 2021, 0.3% higher than before the pandemic but 0.5% points lower than the previous quarter.
Dhillon added: “Andrew Bailey will have been pleasantly surprised by stronger than expected labour market data for September, which has seen unemployment continue to fall despite the furlough scheme coming to an end.
“Yet, with high inflation sticking around this may force a response from the Bank of England in just a matter of weeks.”
Rising inflation isn’t simply a UK problem.
The US inflation rate also reached 4.2% in the year to July, its highest level in nearly 30 years.
Chancellor Rishi Sunak said: “Many countries are experiencing higher inflation as we recover from Covid and we know people are facing pressures with the cost of living, which is why we are taking action worth more than £4.2 billion to help them.”