Price inflation in the UK continues to surge, with the official measure now at its highest in a decade.
The Consumer Prices Index (CPI) measure of price inflation rose 5.1% in the 12 months to November, up from 4.2% a month earlier.
It’s the highest CPI inflation rate since September 2011 and ahead of forecasts, with economists expecting it to come in this month at 4.7%.
According to the Office for National Statistics (ONS), higher costs for energy and transportation are behind these rising prices.
Grant Fitzner, ONS chief economist, explained that higher prices for fuel, energy, clothing and second-hand cars drove price inflation higher, with raw materials prices also rising. He said:
“A wide range of price rises contributed to another steep rise in inflation, which now stands at its highest rate for over a decade.”
Within the latest inflation figures was a record high price for petrol, reaching an average of 145.8p a litre last month.
Second-hand car prices continue to rise due to the ongoing global shortage of microprocessors, limiting the supply of new vehicles.
With the Bank of England targeting CPI inflation at 2%, and due to decide interest rates tomorrow, these rising prices are bound to place more pressure on policymakers to hike rates.
Pressure also comes from the International Monetary Fund (IMF), which forecast price inflation to reach 5.5 and warned the Bank of England not to fall victim to “inaction bias”.
But the other side of the argument, suggesting that interest rates could stay on hold, is the economic uncertainty created by the Omicron variant of Covid-19.
While price inflation is undoubtedly uncomfortably high for members of the Bank’s Monetary Policy Committee, financial markets expect rates to stay on hold in December before starting to rise slowly early next year.
Responding to these latest price inflation figures, Chancellor Rishi Sunak said:
“We know how challenging rising inflation can be for families and households which is why we’re spending £4.2bn to support living standards and provide targeted measures for the most vulnerable over the winter months.”