The CPI inflation rate increased to 2.3% in October, a worrying rise after inflation levels looked to be getting under control.
This represents an increase from 1.7% the month before, while the surge was driven by a 5% annual rise in services inflation, as well as a 3.3% rise in core inflation, which excludes energy, alcohol and tobacco.
Peter Stimson, head of product at MPowered Mortgages, said: “Anyone who declared ‘mission accomplished’ in Britain’s battle against inflation last month spoke too soon.
“After spending one solitary month below the Bank of England’s 2% target, consumer inflation has leapt back into warning territory.
“At 2.3%, annual CPI is barely a fifth of the painful 11.1% it reached in October 2022.
“But this abrupt move in the wrong direction is a setback for the Bank’s ratesetters, who are duty-bound to get inflation down to 2% and keep it there.
“The Bank had already predicted inflation would rise above the 2% threshold, but the government’s ‘tax and spend’ Budget is likely to stoke inflation further in 2025.”
The 2.3% inflation rate represents a six month-high.
Sarah Coles, head of personal finance, Hargreaves Lansdown, delivered another sober verdict, regarding where the inflation rate is heading.
She said: “This month’s unwelcome return above the inflation target is unlikely to be a one-off: inflationary pressures look set to keep prices rising more quickly.
“The good news is that public sector pay rises and the rise in the minimum wage should help ease the immediate pain of higher prices for some people.
“The bad news is that this could end up feeding into higher prices further down the line, spurring another round of inflation.
“Retailers are also warning that higher National Insurance could power price rises, and with inflationary pressure building, rate cuts might be off the agenda for a while yet.”
The Bank of England base rate stands at 4.75% following a rate cut last month.
Donald Trump was re-elected as US President with the help of tapping into people’s cost of living fears – and he will start on January 20th.
However it’s thought his policies of introducing 20% tariffs on foreign imports could lead to higher prices across the world economy.
Douglas Grant, group CEO of Manx Financial Group, said: “Today’s rise in UK inflation, coupled with wider anticipated global inflationary pressures from President Trump’s trade tariffs and tax policies and compounded by the Chancellor’s Autumn Budget fiscal measures, are likely to result in higher interest rates for longer.
”This scenario exerts significant pressure on businesses, amplifying investment hesitancy and underscoring the critical need for businesses to adapt their lending strategies to withstand ongoing market uncertainty.”
