The UK’s annual inflation rate hit a 41-year high of 11.1% last month even as households were helped by the introduction of the government’s energy price guarantee.
Dear staples also contributed to a 2% rise in prices in October alone, which helped drive the increase in the cost of living over the past 12 months to a level not seen since October 1981.
The Office for National Statistics (ONS) said households now pay 90% more for gas, electricity and other fuels than they did a year ago. Food inflation rose from 14.6% to 16.4% – the highest level since 1977.
The city had been expecting higher inflation, but the rise in the annual rate from 10.1% in September was markedly sharper than the 10.7% figure economists had expected and was unwelcome news for Jeremy Hunt ahead of Thursday’s fall statement.
Responding to the figures, the Finance Minister said, “We cannot have long-term and sustainable growth with high inflation. Tomorrow I will put in place a plan to reduce debt, achieve stability, and reduce inflation while protecting the most vulnerable.”
The ONS said the introduction of the household energy price guarantee, which was initially set for two years and has since been reduced to six months, limited the rise in prices for electricity, gas and other fuels to 24.3% between September and October, with gas prices rising 36.9% and prices electricity by 16.9%.
She added that without the guarantee, the rise would have been 75%, and the overall annual inflation rate would have been 13.8%.
The inflation rate as measured by the Consumer Price Index was 4.2% in October 2021 but has increased steadily over the past 12 months. Core inflation, which excludes food, energy, tobacco and alcohol, remained unchanged at 6.5%.
This rise was expected by the Bank of England in its latest Quarterly Monetary Policy Report. Threadneedle Street said inflation would remain high and only fall around 10% in the first three months of 2023.
ONS chief economist Grant Fitzner said: “Rising gas and electricity prices have pushed headline inflation to its highest level in more than 40 years despite the energy price guarantee. Over the past year, gas prices have risen by around 130% while electricity has risen by about 66%.
Increases in a food group also led to higher inflation. This was partially offset by motor fuels, as average gasoline prices fell for the month, while diesel rose, raising the price disparity between the two brands to an all-time high.
“There was further evidence that costs facing companies are rising more slowly, driven by crude and oil prices.”