Inflation hits higher than expected 2.3% in October as energy bills rise
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Inflation has risen by more than expected due to an increase in energy bills, according to official figures.
It’s the first rise in the rate of price increases, as measured by the consumer prices index (CPI), for three months.
The figure stood at 2.3% in October, according to the Office for National Statistics (ONS), above the 2.2% forecast by economists.
This is also a sizeable increase on the 1.7% recorded a month earlier.
Household gas and electricity bills rose last month as the energy price cap brought the cost of a typical annual bill up by an extra £12 a month.
Inflation wasn’t higher because there were falls in live music and theatre ticket prices and continued drops in the cost of raw materials due to cheaper oil.
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These figures are a world away from the double-digit levels of inflation we experienced in 2022, when the index peaked at 11.1%. Inflation has broadly been coming down as the Bank of England has ratcheted up interest rates.
However, Labour’s budget has created inflation jitters. The government is injecting a big fiscal stimulus into the economy in the form of higher government spending.
The rise in employers’ national insurance contributions could also lead to higher prices.
This has raised the inflation forecasts and likely slowed the pace of interest rate cuts.
What about interest rates?
Today’s data may affect the likelihood of the Bank of England cutting interest rates next month.
Before the inflation figure was announced, there was a 78.3% chance of no change – and a 21.7% chance that the cost of borrowing would fall by 0.25 percentage points, according to market expectations.
After the announcement that changed to 84% chance of no cut.
Also on the up was another important measure of inflation watched by the Bank – core inflation, which measures price rises but excludes food and energy costs as they’re liable to sharply fall or rise.
Core inflation rose to 3.3%, more than the 3.1% expected by economists polled by Reuters.
Services inflation also came in above forecast and higher than a month ago at 5%.
Political reaction
Darren Jones, the chief secretary to the Treasury, said the government understands people are struggling after the inflation announcement.
He said: “We know that families across Britain are still struggling with the cost of living. That is why the budget last month focused on fixing the foundation of our economy so we can deliver change.
“But we know there is more to do. That is why the government is focused on economic growth and investment so we can make every part of the country better off.”
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But shadow chancellor Mel Stride said: “It’s higher inflation and lower growth under Labour.
“What is worrying about today’s announcement is that inflation is running ahead of expectations and official forecasts state these figures are not expected to improve.
“Labour’s budget will push up inflation and mortgage rates.”
