British inflation surged to a 10-year high last month as household energy bills rocketed, according to data this week that will bolster expectations that the Bank of England will raise interest rates next month.
Consumer prices rose by 4.2% in annual terms in October, leaping from a 3.1% increase in September.
“Today's inflation data will reinforce the Bank of England's resolve to act,” said Yael Selfin, chief economist at KPMG UK.
The pound climbed to a one-week high versus the dollar and a 21-month high against the euro after the data.
Today's inflation data will reinforce the Bank of England's resolve to act
— Yael Selfin, chief economist at KPMG UK
Finance minister Rishi Sunak said rising inflation was not just a British problem and the government was taking action to offset the hit to spending power, even as it scales back most of its coronavirus emergency support.
Britain's inflation rate puts it in the middle of the pack among G7 countries, with annual US consumer price inflation now running north of 6%.
The Office for National Statistics (ONS) said household energy bills were the biggest driver of inflation after the lifting of a regulatory cap on bills last month, with gas prices paid by consumers up 28.1% in the year to October.
British energy suppliers are grappling with soaring wholesale gas prices that have led to the collapse of a number of energy companies, forcing more than 2-million customers so far to switch providers — often on higher tariffs.
The Bank of England is expected to become the first of the world's major central banks to raise rates since the pandemic swept the global economy, with investors and economists increasingly predicting that will happen on December 16.
There were signs in the data of further inflation pressure in the pipeline. Prices charged by factories rose more than expected, up 8% compared with October 2020 — the sharpest increase since 2011. Manufacturers' input costs jumped by 13%, the most since 2008, the ONS said.
