Inflation has hit a 40-year high of 11.1% in the year to October, up from 10.1% the previous month.
The market had been anticipating a 10.7% increase and is higher than the 11% peak predicted by the Bank of England.
Despite the introduction of the government’s Energy Price Guarantee, gas and electricity prices made the largest upward contribution to the change in both the CPIH and CPI annual inflation rates between September and October 2022.
Rising food prices also made a large upward contribution to change with transport (principally motor fuels and second-hand car prices) making the largest, partially offsetting, downward contribution to the change in the rates.
Simon Webb, managing director of capital markets and finance at LiveMore, said: “The spiralling cost of energy and food are the main components of the high inflation we have today.
“What appears to be a foregone conclusion, judging by the recent 0.2% downturn in GDP, is that the UK is moving into recession along with other global economies. This should have the effect of bringing inflation down, however, there are still global shortages of food, with Russia’s invasion of Ukraine being a large contributory factor.
“What is notable about the CPI inflation figure is that it has been calculated using subsidised energy prices, so the 11.1% rate is lower than if there was no energy price cap in place. This cap is due to be removed, or reviewed, in April 2023 but if it is taken away, inflation may well will pick up again. It could be a roller coaster ride for inflation in the next year.”
Paul McGerrigan, CEO at fintech broker Loan.co.uk, added: “The war in Ukraine has taken an alarming turn for the worst and looks further from resolution than ever. The impact on global supply chains and energy pricing will therefore continue to fuel inflation until the UK can reduce dependency.
“Despite wages rising at their fastest rate for more than 20 years, they are still unable to keep pace with rapidly escalating costs, which means household budgets continue to feel the pressure. The recent record jump in Bank Rate has compounded this further.
“Everyone waits in eager anticipation for the Chancellor’s plan and initial decisions. He needs to build confidence in the markets by balancing the books without plunging the UK into a deep and lasting recession. A challenge indeed but one he seems to want to take head on.
“Carefully considered personal finance decisions particularly in relation to mortgages are critical to help many households navigate the next 12-18 months. All of us, who offer property-based borrowing advice need to step up and be there.”
