New figures released by the Office for National Statistic today show that inflation in the UK hit 4.2 per cent in October.
The new data from the ONS’ Consumer Price Index, demonstrates that prices more than doubled the target of 2 per cent.
International Trade Secretary Anne-Marie Trevelyan told Sky News’ Breakfast programme this morning that the Chancellor had previously anticipated a “slight increase in inflations in the months ahead” due to post-COVID economic pressures.
The Bank of England has previously forecasted that inflation in the UK will surpass 4 per cent later in the year, twice its formal target of 2 per cent.
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Earlier this month the Bank’s Monetary Policy Committee voted by a majority of 7-2 to maintain interest rates at 0.1%.
The IMF warned in October that central bankers must to be prepared to issue higher rates if inflation rockets, even if it means a slower return to a pre-pandemic labour market.
Its recent World Economic Outlook report also said the British economy will grow by 6.8 per cent this year, down 0.2 percentage points from their July forecast, and around 0.2 percentage points faster next year at 5 per cent.
The fund said it thought inflation would return to pre-pandemic levels midway through 2022, but said “considerable” international variation was likely.
Figures from the National Institute of Economic and Social Research (NIESR) warned that inflation “will peak above 4% in the first half of 2022 and that the Bank of England will consider a rate increase to prevent a wage & prices spiral from de-anchoring inflation expectations.”
Inflationary pressures are also thought likely to lead to an increase in interest rates which will then increase the annual cost of servicing the now considerably increased national debt.
Consumer prices increased by 3.1% in the year to September, down from 3.2% in August, when inflation hit a nine year high.