Official data show that inflation has climbed back above the Bank of England’s 2% target, driven by a rise in energy bills.
The Consumer Prices Index (CPI) increased to 2.3% in October, as reported by the Office for National Statistics (ONS). This marks a sharp rebound from the three-year low of 1.7% recorded in September and exceeds analysts’ expectations.
Grant Fitzner, chief economist at the ONS, explained: “Inflation rose this month due to the higher energy price cap, which resulted in increased costs for gas and electricity compared to a decline during the same period last year.”
In October, average annual household energy bills rose by £149 after regulator Ofgem raised the price cap by approximately 10%, from £1,568 to £1,717 for a typical dual-fuel household in England, Scotland, and Wales.
Chancellor Rachel Reeves’ tax-focused fiscal policy, combined with the possibility of tariffs under US President-elect Donald Trump, poses a risk of driving consumer prices higher.
Monica George Michail, Associate Economist at the Institute of Economic and Social Research, commented: “While we anticipate the Bank of England will continue cutting interest rates in 2025, the pace of reductions is likely to be slower than previously expected, with rates potentially remaining elevated for a longer period.
“This projection is influenced by expected inflationary pressures arising from the recently announced budget, as well as heightened global uncertainty, particularly concerning the Trump presidency.”
