Inflation rose to 2.3% in October

October Consumer Price Index (CPI) data from the Office of National Statistics (ONS) has revealed a 0.6 percentage point rise in the rate of inflation.

Annual inflation reached 2.3% in October, its highest rate since April, after a sharp rise on the previous month’s figure of 1.7%. While economists had anticipated an increase in inflation, particularly as energy bills were set to rise under Ofgem’s new price cap for October to January, the jump is steeper than expected.

Alongside electricity and gas price rises of 7.7% and 11.7% respectively, other categories in the ONS’ shopping basket of goods used to track inflation that saw price increases were food and drink, particularly vegetables, and which saw a 1.9% annual rate of inflation in October, up from 1.8% in September, and airfares, which cost 6.8% more on average than 12 months ago, despite typically falling at this time of year.

Despite some price rises in some categories, inflation was continuing to slow down in many areas compared to last month, with motor fuels among the products that were cheaper than this time last year. The ONS’ recreation and culture category, for example, saw a 0.1% fall in prices compared the previous month, with the annual rate of inflation down to 3.1%, compared to 3.9% in September.

The rise in inflation follows the Bank of England’s decision to cut interest rates by a further 0.25 percentage points to 4.75%. While the Governor of the Bank of England commented rates would continue to come down gradually, this latest rise in inflation to back above the Bank’s target rate has financial markets largely ruling out another cut in 2024.

Elsewhere in the world, similar developed economies have also seen an uptick in inflation in October. In France, inflation rose 0.2 percentage points to 1.8%, while Germany saw a 0.4 percentage point increase to 2.4%. The EU average rate of inflation also matched the UK’s rate for October at 2.3%, a 0.2 percentage point increase on its September figure. The USA’s HICP measure of inflation, which uses a different methodology to the CPI and other European statistics and so is not directly comparable, also saw its second consecutive month of rising inflation, reaching 1.9% in October.