Britain’s inflation rate jumped to 4.2%, near its highest level in a decade in October. This is due to high energy bills and a resurgence in post-quarantine (lockdown) demand. Official data showing these figures on Wednesday (17/11) also sparked new talk of raising interest rates.
Office for National Statistics (ONS) said the annual inflation rate rose to 4.2% and was the highest level since November 2011.
The note followed a 3.1% pace in September and more than doubled Bank of England’s (BoE) 2.0% target, prompting speculation about a rate hike after unemployment data released Tuesday (16/11) showed optimism. Rising consumer prices also increase the cost of living, especially when wages fail to keep pace.
“Inflation rose sharply in October to the highest level in almost a decade. This situation was driven by an increase in household energy bills due to the rising cost of goods, prices for used cars and fuel as well as rising prices at restaurants and hotels. The costs of manufactured goods and raw material prices have also increased substantially, and are now at their highest levels for at least 10 years,” said ONS chief economist, Grant Fitzner.
For information, inflation soared due to higher domestic electricity and gas prices, as well as a lack of supply of fuel oil. In October, the British authorities had in fact put forward the so-called energy price ceiling, namely the standard variable tariff restrictions imposed by domestic energy providers.
Meanwhile, rising used car prices were caused by a worldwide shortage of semiconductors and hampered the production of new vehicles.
Inflationary pressures were also triggered by the global supply crisis, and soaring raw material prices. Even the BoE this month kept its benchmark key interest rate at a record low of 0.1%. However, Britain’s central bank has signalled the possibility of an increase in the coming months to curb Inflation Pressure.
In addition, central banks have taken advantage of rising interest rates to try and dampen high inflation, which is weighing on companies and consumers globally. The reason is, when countries reopen from lockdown rules, many business actors have to struggle to meet the demand for goods and services, hence causing inflation to soar.
“Many countries are experiencing higher inflation as we recover from Covid, and we know people are facing pressures with the cost of living,” said UK Finance Minister, Rishi Sunak, in response to the data. On the other hand, the market expects the BoE to raise its key benchmark interest rate in November for the first time in more than three years.
The BoE’s stance appears in contrast to other global central banks, including the US Federal Reserve, which chose to tighten monetary policy as growth recovers and inflation spikes. It noted that US inflation had skyrocketed to its highest level in 30 years, at 6.2% in October.