UK Energy prices drive inflation to 41-year high

Inflation rose to an all-time high for milk products, pasta, and energy in October despite government assistance to lower bills.

According to the Office for National Statistics, prices rose 11.1 percent in the 12 months ending October. This is an increase of 10.1 percent from the month before.

This was the highest inflation rate since October 1981. However, costs increased 2pc in the month before. Core inflation, which excludes volatile food and energy prices, remained at 6.5pc.

This latest increase was caused by the largest surge in grocery costs since 1977, and higher energy prices even after the Government put a cap on average gas/electricity prices.

According to the ONS, this is the highest rate recorded since 1950 when records were first started.

According to the ONS, inflation was caused by a 24.7% increase in energy between September and October. This is after Ofgem’s price cap increased from £1,971 on October 1 to £2,500.

Prices for electricity, gas and other fuels increased by 90pc over a year and 25pc in September compared to September. However, the energy bills limit was still an increase over Ofgem’s previous cap.

After a huge jump in the prices of milk, cheese and eggs, food prices increased by 16.5pc. Low-fat milk rose 48pc, cheese rose 27pc, and pasta and Couscous rose 34pc.

This is the latest indication of a harsh winter for households, with the Chancellor promising to control inflation through tax increases and spending cuts in Thursday’s Autumn Statement.

Jeremy Hunt said that the new spike in inflation was due to the “aftershocks of Covid’s invasion of Ukraine” and warned that high prices can hinder long-term growth.

As he outlines plans to increase taxes and reduce spending to support the public finances, he stated that tighter fiscal policies can reduce inflation.

Mr Hunt stated that it was our duty to support the Bank of England’s mission to bring inflation back to target through responsible financial management. This requires tough, but necessary decisions regarding tax and spending in order to balance the books.

According to city economists, inflation has likely peaked but it will still depend on the decision of the Chancellor on energy support.

Capital Economics’ chief UK economist Paul Dales stated that the “inflation war is not yet won”, even though inflation has topped.

He stated that prices will be affected by government energy support, food inflation and the “stupidness of core inflation”.

He stated that “the recent fall in global agricultural commodity price prices suggests to us food inflation will soon begin to ease.”

“There are growing signs that the upward pressure of core inflation from global factors may be fading.”

James Smith, an ING economist, said that inflation will not fall below 2% until the beginning of next year, but predicted that the Bank of England would slow down its interest rate increases to tame prices.

“With indications that inflation, both headline and core, is nearing or at a peak and signs of recession mounting we believe the Bank of England will pivot back to increasing its rate of hike in 50 basis points increments in December.”

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