UK inflation in October hits a 41-year high
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The increased household and energy prices have brought UK inflation to a 41-year high. The inflation data was released one day before the finance minister, Jeremy Hunt, announced plans for tax increases and spending cuts to tame the price increase.
UK inflation reaches a 41-year high
The inflation level in the UK is at 11.1%, the highest since October 1981. The rate is a notable increase from the 10.1% reported in September. According to a Reuters poll, inflation could be peaking, with many estimating that the inflation rate would be at 10.7%.
The Office for National Statistics said that the inflation level could have been higher at around 13.8% if the government had not stepped in to tame a further increase in household energy bills.
While responding to the data, the finance minister, Jeremy Hunt, said that “tough but necessary” measures were needed to address the increasing prices. He also said there was a need to assist the Bank of England in taming inflation levels and returning them to target.
Analysts weigh in on inflation data
According to analysts, the high inflation level is piling pressure on the Bank of England to maintain an interest rate hike. However, the strict measures expected to be announced this week could increase borrowing costs by a notably smaller margin.
Ellie Henderson, an economist at Investec, commented on the rising UK inflation, saying that the country was in a unique situation as the government wanted to introduce a raft of measures to balance its books.
“The scale of fiscal tightening proposed will no doubt drag on economic growth and, as such, should bring inflation down with it, opening the door for the Bank of England to tighten policy at a less aggressive pace,” Henderson added.
On the other hand, Mike Bell, a strategist at JPMorgan, noted that the inflation data released this week showed that the effects of the tightening labor market on inflation had been underestimated. Bell also said that the Bank of England would increase the interest rates to a peak of 4.5% from the current 3%.
Bell said that the inflation numbers did not align with the message from the Bank of England that modestly high-interest rates would be needed to lower inflation and bring it down to the 2% target.
The Bank of England had earlier predicted that inflation levels in October would come in at 10.9%. Therefore, the current numbers show that inflation is higher than expected.