UK inflation worse than forecast

The cost of living in the UK rose to a 10-year high in October and more than double the Bank of England target.

The UK’s consumer price index (CPI) rose 4.2% in October. Photo: AFP

The UK’s consumer price index (CPI) in October rose 4.2% year-on-year. In September, this index increased by 3.1%. As such, the actual increase of 4.2% was higher than the average forecast of 3.9% that economists gave Reuters.

In early November, the Bank of England decided to keep interest rates steady amid moderate economic growth and a tight labor market. Therefore, despite the expectations of many investors, the Bank of England did not become the first major central bank in the world to raise interest rates right in the time of Covid-19.

However, with the news that October CPI increased by 4.2%, pressure is on the Bank of England and forces it to act at its policy meeting in December.

The agency forecasts inflation will continue to rise to around 5% in spring 2022 before returning to its 2% target by the end of 2023 as the impact of higher oil and gas prices subsides and commodity demand fades. decrease.

Mr. Samuel Tombs, chief economist at economic consulting firm Pantheon Macroeconomics agreed that “the peak of 5% inflation is still ahead”. This expert explained that UK inflation spiked in October, to the highest level since December 2011, mainly because the UK Energy Authority (Ofgem) adjusted the cost of energy per household to increase by 12 .2% since October and this cost is expected to be adjusted to normal in April 2022.

Besides, fuel prices for engines in October, although increased by 3.0% compared to the previous month, still decreased slightly compared to a year ago and only made headline inflation inched up 0.1 percentage point. While food prices closed the gap with the producer price index, rising to 1.2%, from 0.8%.

Sarah Coles, an analyst from Hargreaves Lansdown (UK), said that the above inflation figures put the Bank of England at risk of “plunging into the fight against inflation and proving his strength”.

According to Mrs. Sarah Coles’ speculation, then UK savers will be in a dilemma, on the one hand, hoping for higher interest rates, on the other hand, waiting until the end of the interest period before converting their savings to another purpose.

Also in October, inflation of the euro area (Eurozone) also reached the highest level in the past 13 years and chased the UK at 4.1%. The cause of high inflation in the Eurozone is also from energy costs. According to Reuters data, this is the eurozone’s highest inflation since July 2008 and above the forecast of 3.7%. In September, Eurozone inflation was 3.4%.