Daily Times

British inflation spiked close to a decade-high in October partly on higher energy bills and resurgent post-lockdown demand, official data showed on Wednesday, sparking fresh talk of an interest rate hike.

The annual rate jumped to 4.2 percent, the highest level since November 2011, the Office for National Statistics said in a statement. That followed 3.1 percent in September and was more than double the Bank of England’s 2.0 percent target, prompting speculation over a rate hike after Tuesday’s upbeat unemployment data.

Rising consumer prices ramp up the cost of living, especially when wages fail to keep pace. “Inflation rose steeply in October to its highest rate in nearly a decade,” ONS chief economist Grant Fitzner.

“This was driven by increased household energy bills due to the price cap hike, a rise in the cost of second-hand cars and fuel as well as higher prices in restaurants and hotels.

“Costs of goods produced by factories and the price of raw materials have also risen substantially and are now at their highest rates for at least 10 years.”

Inflation leaped on higher prices for domestic electricity and gas, as well as a motor fuel which faced shortages.

UK authorities in October lifted the so-called energy price cap, which limits standard variable tariffs charged by domestic energy providers.

Second-hand car prices meanwhile rose as a worldwide semiconductor shortage dents new vehicle production.

Inflationary pressures were also fueled by the global supply crunch and the soaring cost of raw materials.

The BoE had this month kept its key interest rate at a record-low 0.1 percent, but flagged a likely hike in the coming months to dampen inflation. Central banks use rate hikes to try and dampen high inflation, which is weighing on companies and consumers globally.