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UK inflation accelerated sharply to 2.3 per cent in October, as higher energy costs pushed price growth above the Bank of England’s target.
The annual consumer price index figure from the Office for National Statistics was up from 1.7 per cent in September and above the expectations of analysts surveyed by Reuters of 2.2 per cent.
Price pressures have been expected to rise after a 10 per cent increase last month in Britain’s energy price cap, which governs millions of households’ gas and electricity bills.
October’s figure complicates the BoE’s deliberations over when to cut rates. The bank has repeatedly signalled it will pursue a “gradual” approach as it seeks to meet its 2 per cent inflation target.
“These figures confirm a disappointing resurgence in inflation as the recent tailwind from lower energy costs turned into a headwind in October,” said Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales.
Earlier this month, the BoE cut borrowing costs by a quarter-point to 4.75 per cent, but signalled that a further move was unlikely before 2025. The Monetary Policy Committee announces its next decision on interest rates on December 19.
Core inflation was 3.3 per cent in October, higher than economists’ expectations of 3.1 per cent, and up from 3.2 per cent in September, according to the ONS.
The rate of services inflation, which is closely watched by the central bank as a gauge of underlying domestic price pressures, was 5 per cent, above expectations of 4.9 per cent.
On Tuesday, Andrew Bailey, the BoE governor, repeated the need for the central bank to adopt a “gradual” approach to further rate cuts as officials gauge the impact of October’s Budget, which included a steep increase in employer national insurance contributions.
The pound rose following the release of the figures, climbing 0.2 per cent to $1.271, as traders raised bets that a reduction in borrowing costs at the December meeting was unlikely.
Analysts at Capital Economics said the data “lends some support to our view that the Bank will skip the December meeting and cut rates only gradually” beyond that.
“We know that families across Britain are still struggling with the cost of living,” said Darren Jones, chief secretary to the Treasury, in response to the figures. “That is why the Budget last month focused on fixing the foundation of our economy so we can deliver change.”