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Inflation in the UK rose sharply to a six-month high in October and back above the rate targeted by rate-setters at the Bank of England, official figures show.
It is the sharpest month-on-month increase in the rate of inflation for two years, and is set to cement market expectations that there will be no further cuts in borrowing rates in 2024.
Higher domestic energy bills pushed consumer price inflation up to 2.3 per cent in the year to October from the three-year low of 1.7 per cent recorded the previous month, the Office for National Statistics said.
The increase, which was above forecasts for a more modest increase, took inflation above the bank’s target rate of two per cent.
Earlier in November, the bank increased its main interest rate by a quarter of a percentage point to 4.75 per cent – the second in three months – after inflation fell to its lowest level since April 2021.
However, bank governor Andrew Bailey cautioned that rates would not fall too fast in the coming months, partly because last week’s budget measures from the new Labour government would likely result in prices rising by more than they would otherwise have done.
Rate-setters will meet once more for 2024, on December 19, by which time they will be armed with more monthly inflation reading.
Central banks worldwide dramatically increased borrowing costs from near zero during the coronavirus pandemic when prices started to shoot up, first as a result of supply chain issues and then because of Russia’s full-scale invasion of Ukraine which pushed up energy costs.
As inflation rates have recently fallen from multi-decade highs, the central banks have started cutting interest rates.
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