UK inflation hits 41-year high
‘Tough but necessary’ decisions required: Hunt
Published: Nov 16, 2022 10:56 PM
Surging household energy bills and food prices pushed British inflation to a 41-year high, according to data published a day before Finance Minister Jeremy Hunt announces tax hikes and spending cuts to control price growth.

Consumer prices rose 11.1 percent in the 12 months to October, the most since October 1981 and a big jump from 10.1 percent in September, the Office for ­National Statistics (ONS) said on Wednesday.

Economists polled by Reuters had forecast the inflation would rise to 10.7 percent.

Inflation would have risen to around 13.8 percent in October had the government not intervened to limit the price of household energy bills to 2,500 pounds ($2,960) a year on average, the ONS said.

In response to the data, Hunt - who is due to outline a new budget on Thursday - said "tough but necessary" decisions were required to tackle rising prices.

"It is our duty to help the Bank of England [BoE] in their mission to return inflation to target by acting responsibly with the nation's finances," he said in a statement.

Analysts said the jump maintained pressure on the BoE to keep on raising interest rates.

"These numbers sit uncomfortably alongside the message sent from the Bank of England ... when it argued that only modestly higher interest rates would be necessary to bring inflation back towards its 2 percent target," Mike Bell, global market strategist at J.P. Morgan Asset Management, said. "We are not so convinced."

Inflationary pressures from Britain's tight labor market had been underestimated and workers were likely to ask for more pay going forward to offset inflation, Bell said, predicting the BoE would raise rates to a peak of 4.5 percent from 3.0 percent now.

The BoE had predicted inflation of 10.9 percent in October in forecasts published this month.

Hurting those on the lowest incomes the most, 12 months to October prices of food and non-alcoholic beverages rose at the fastest rate since 1977, the ONS said.

Unlike the leap in the headline ­number, core inflation - which excludes food and energy and other volatile ­components - was unchanged at 6.5 percent.

The lowest-income households, for whom energy and food take up a bigger share of spending, suffered an inflation rate of 11.9 percent while top earners faced a 10.5 percent rate, the ONS said.

Producer price data showed there was still inflation pressure in the pipeline but hinted at a possible slowdown.

Manufacturers' costs for raw materials and energy rose at their slowest pace since March but at 19.2 percent the increase was still huge by historical standards.

Prices charged by factories rose by 14.8 percent in the 12 months to October, the slowest increase since April.