UK inflation rises to highest level in almost 30 years at 5.4%

[dutchman]

Surprise fall in inflation paves way for interest rate cuts



UK inflation fell unexpectedly to 1.7% in the year to September, the lowest rate in three-and-a-half years.

It means the annual rate prices are rising at is now below the Bank of England's 2% target, paving the way for further interest rate cuts.

Lower airfares and petrol prices were the main drivers behind the surprise slowdown, official figures showed, external.

Separately, September's inflation figure is also normally used to set how much many benefits will rise by next April.

UK interest rates are currently at 5%. The Bank made a first cut in August but decided to hold them last month.

It is already widely expected that they will be cut in November.

Yael Selfin, chief economist at KPMG UK, warned that although the Bank would be likely to drop rates next month, inflation is likely to rise again with household energy bills increasing this month by around 10%.

The surprise fall in inflation last month to 1.7, down from 2.2% in August, was mainly driven by airfares and fuel.

Petrol and diesel prices were significantly lower, dropping by 10.4% in September compared with the same month a year earlier.

Airfare prices for domestic, European and long-haul flights normally fall after the summer rush, but they fell more than normal last month.

However, food and non-alcoholic drink prices rose, with costs jumping for milk, cheese, eggs, soft drinks and fruit.

This was the first time food price inflation has risen March last year.

September's inflation data is normally used to calculate how much many benefits go up in April.

This includes the biggest: universal credit, which goes up at the government's discretion.

All the main disability benefits - personal independence payment, attendance allowance and disability living allowance - as well as carer’s allowance, go up by at least September's inflation rate by law.

The government has said it wants to shrink the UK's annual disability and incapacity benefits bill.

[dutchman]

There's no 'surprise' about it, inflation is always lowest in September. The government rigs it that way so they don't have to increase benefits more.

[rebbonk]

There's no 'surprise' about it, inflation is always lowest in September. The government rigs it that way so they don't have to increase benefits more.

Dead on, Dutchman. They think the public are stupid.

[dutchman]

Another example of 'shrinkflation'



There used to be EIGHT sachets in a box whereas now there are only SEVEN.

To make matters worse, you need at least TWO sachets in each cup to be able to taste them at all as they're so insipid but being an odd number you now need to buy at least TWO boxes or else have one sachet left over.

[dutchman]

NOT SAFE FOR WORK!

[dutchman]

£9.10 for medium fish and small chips tonight!

I'm not blaming the chip shop, it's still one of the cheapest in the city. Reeves' budget has put up all their expenses.

[dutchman]

UK inflation rate hits highest level for eight months



The UK inflation rate has gone up for the second month in a row, with prices rising at their fastest pace since March.

Inflation hit 2.6% in the year to November, according to official figures.

Fuel and clothing were among the main drivers behind the rise. Increasing ticket prices for gigs and plays were also a factor.

Analysts say the latest figures mean the Bank of England will almost certainly not cut interest rates when it meets on Thursday.

"Inflation rose again this month as prices of motor fuel and clothing increased this year but fell a year ago," said Grant Fitzner, chief economist at the Office for National Statistics (ONS), which gathered the data.

"This was partially offset by air fares, which traditionally dip at this time of year, but saw their largest drop in November since records began at the start of the century."

The official forecasting body said in October that inflation was likely to pick up to 2.6% in 2025 in part due to the impact of Budget measures announced in October.

Shadow chancellor Mel Stride said: "The chancellor has made a series of irresponsible and inflationary decisions."

"These figures mean higher costs in the shops, less money in working people's pockets and risks keeping mortgage rates higher for longer," he said.

Prices for food and non-alcoholic drinks, alcohol and tobacco, and footwear all rose at a faster pace last month.

A wider measure of inflation showed housing and household services costs, including rent, rose by 3.5% over the past year.

Sarah Coles, head of personal finance at the financial services firm, Hargreaves Lansdown, said: "Inflation is staying put for now, like an unwelcome Christmas party guest hogging the sofa into the small hours.

"The question is whether it can be shifted, or if it's going to hang around to ruin our plans for months – eating us out of house and home and driving up the cost of everything again," she said.

[dutchman]

Annual CPI inflation rate hits 10-month high in January, in a blow to ministers as cost of living accelerates



UK inflation accelerated faster than expected at the start of this year, eating into workers’ wages and reducing the chance of an interest rate cut next month.

The consumer prices index (CPI) measure of inflation rose to 3% in January, the Office for National Statistics (ONS) reported, up from 2.5% in December.

City economists had expected a smaller increase in January’s inflation rate, to 2.8%.

The ONS said a jump in the cost of meat, bread and cereals pushed up food bills, while higher private school fees after the government’s withdrawal of a VAT exemption increased the cost of education services.

Airline tickets fell in price in January, but not by as much as usual, and combined with a rise in fuel costs, pushed up the annual rate of inflation in the transport sector to its highest level since February 2023.

Dean Butler, a director at the pension firm Phoenix Group, said: “With inflation rising to 3% in January, earlier expectations of a smooth ride towards a lower inflation, lower interest rate environment in 2025 have taken another hit.”

He said the rise in the inflation rate would deter the Bank of England from cutting rates more aggressively this year.

City investors slashed the chance of an interest rate cut in March to 15%, down from 24% before the inflation data was released, according to the latest money market prices.

However, the City still expects two more interest rate cuts this year, after the reduction this month by the Bank of England to 4.5%.

The chancellor is understood to be concerned that a rise in inflation through the spring and summer will spur public sector workers to demand more than the 2.8% wage increase the government has agreed can be paid from existing budgets.

Bank of England forecasters have predicted that inflation will rise to 3.7% this year as energy prices and utility bill increases add to business and household costs.

January’s rise in inflation will come as a blow to ministers, who were given a boost a month ago when the CPI dropped from 2.6% in November to 2.5% in December.

Earnings growth edged up to 6% including bonuses in December, giving workers a real-terms pay rise of 3.5%.

[dutchman]

UK food inflation highest in 11 months, likely to rise further, BRC says



British food price inflation jumped to its highest in nearly a year in April, according to a survey published on Tuesday that said higher costs for retailers could put further upward pressure on shop prices.

The British Retail Consortium warned of the risk of further upward price pressures in the coming months as the industry faces increased costs, including a new packaging levy coming into force in October.

Food prices were up by an annual 2.6% in April, a stronger rise than March's 2.4% increase, and the biggest increase since May 2024 when they rose 3.2%, the BRC said.

But overall shop prices fell by 0.1% in the 12 months to April after an annual fall of 0.4% the month before.

Mike Watkins, head of retailer and business insight at NielsenIQ, which publishes the data with the BRC, said he expected shoppers to remain cautious about spending on discretionary items despite the later timing of Easter this year having helped sales.

The Bank of England is trying to gauge to what extent the higher tax burden for employers will lead to price rises in stores and increase the risk of persistently high inflation pressure.

Britain's headline rate of inflation slowed to 2.6% in March, but the BoE expects it will reach around 3.7% later this year, nearly double its 2% target against a backdrop of rising household bills and higher labour costs.

Last week BoE Governor Andrew Bailey, who warned of a hit to growth from U.S. tariffs, said he hoped the expected increase in inflation would prove transitory.

A separate BRC survey, published on Tuesday, showed more than half of human resources directors expect to reduce hiring due to the government's planned Employment Rights Bill.

The bill, which proposes a raft of protections for millions of workers including guaranteed minimum hours, greater hurdles for sacking new staff and increased sick pay, is currently being debated in parliament.

"It is crucial that poor implementation of the upcoming Employment Rights Bill does not add further pressure to costs – pushing prices further up, and job numbers further down," BRC Chief Executive Helen Dickinson said.

[dutchman]

Bills push inflation to highest in more than a year



A rise in the cost of household bills has pushed UK inflation to its highest rate in more than a year, according to official data.

Inflation was 3.5% in April, up from 2.6% in March and higher than economists had expected.

Water, gas and electricity prices all went up on 1 April along with a host of other bills, pushing inflation further above the Bank of England's target of 2%.

Two interest rate cuts were expected this year, but some economists think April's inflation figure means it is more likely there will be only one.

Prices were expected to rise at 3.3% in the year to April.

The Bank of England has previously said it expects inflation to peak at 3.7% between July and September 2025 before slowly falling.

Huw Pill, chief economist at the Bank of England who sits on the nine-person committee which votes on interest rates, said earlier this week that he feared the Bank was reducing rates too rapidly and that the momentum behind falling inflation was "stuttering".

Water and sewerage prices rose by 26.1% in April, which the ONS said was the largest rise for 37 years, since official records began.

A sharp jump in the cost of airfares compared to April last year also helped drive up inflation.

The later Easter this year is thought to have contributed to the rise in flight costs and package holidays, which is expected to be a one-off increase.

Meanwhile, the cost of services specifically rose 5.4% in the year to April, which some economists attributed to the rise in National Insurance Contributions for employers and a higher minimum wage coming into force, changes which pushed up costs for businesses more broadly.

Services inflation refers to rises in prices for things that are bought for use or consumption, like eating at a restaurant, getting a haircut, or going to the cinema.

Britain is a services-led economy which means that more of our jobs come from providing a service rather than making a product.

Core inflation which strips out volatile prices such as energy and food also rose more than expected.