UK inflation rises to decade high

Latest inflation data puts pressure on Bank of England before Thursday meeting

Inflation in the United Kingdom soared to 5.1% in November, its highest level since September 2011’s peak of 5.2%.  

The latest figures from the Office for National Statistics showed a marked increase from the 4.2% inflation rate seen in October. 

Petrol prices rose to  an average of 145.8 pence per litre last month, the highest  level ever recorded. A year earlier, it stood at 112.6p/litre. 

Used-car prices jumped by 3.1% from the month before, contributing to a cumulative rise of 31.3% since April 2021. 

Reaction

The ONS’ Chief Economist, Grant Fitzner, 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… Clothing costs – which increased after falling this time last year – along with price rises for food, second-hand cars and increased tobacco duty all helped drive up inflation this month.”

He added: “The costs of goods produced by factories and the price of raw materials have continued to increase significantly to their highest rate for at least twelve years.”

In light of the latest figures, Chancellor of the Exchequer Rishi Sunak said: “We know how challenging rising inflation can be for families and households.” 

Criticising Boris Johnson’s government, Pat McFadden, the shadow economic secretary to the Treasury, argued: “Instead of taking action, the government are looking the other way, blaming ‘global problems’ while they trap us in a high tax, low growth cycle."

Bank of England

The latest inflation figures are expected to put further pressure on the Bank of England to raise interest rates when it meets on Thursday. The bank’s official inflation target is 2%. 

The decision by the central bank’s Monetary Policy Committee (MPC) not to raise interest rates from their record lows caught the markets off-guard last month. Comments made in the run-up to the meeting by leading MPC members had led many to believe a rate hike was imminent. 

On Tuesday, the International Monetary Fund called on the BoE to raise interest rates, stating: “It would be important to avoid inaction bias, in view of costs associated with containing second-round impacts.”

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