LONDON (AP) — Britain’s inflation rate hit a 41-year high in October, fueling demands that the government do more to ease the country’s cost-of-living crisis when it releases new tax and spending plans on Thursday.
Consumer prices jumped 11.1% in the 12 months to October, from 10.1% in September, the Office for National Statistics said on Wednesday. The October figure beat economists’ expectations of 10.7%.
Rising food and energy prices drove Britain’s inflation rate to the highest since October 1981, the ONS said.
The figures come a day before Treasury chief Jeremy Hunt unveils a new budget amid growing calls for higher wages, increased benefits and more spending on health and education, as runaway inflation is eroding the purchasing power of people across the country.
The demands complicate Hunt’s efforts to close an estimated 50 billion pound ($59 billion) budget shortfall and restore the government’s financial credibility after the disastrous economic policies of former Prime Minister Liz Truss undermined public confidence. investors and caused turbulence in the financial markets.
“We can’t have long-term sustainable growth with high inflation,” Hunt said after the inflation figures were released. “Tomorrow I will present a plan to reduce debt, provide stability and reduce inflation while protecting the most vulnerable.”
Governments and central banks around the world are struggling to contain widespread inflation which began to accelerate as the global economy recovered from the coronavirus pandemic, then soared after Russia’s invasion of Ukraine has restricted the supply of natural gas, petroleum, grain and cooking oil. Although there is little policymakers can do to combat these external shocks, these price increases become entrenched as producers pass their costs onto consumers and workers demand higher wages, which is a longer-term threat to economic growth.
Earlier this month, the Bank of England forecast UK inflation to peak at around 11% in the fourth quarter and start to decline early next year. The bank has approved eight consecutive interest rate hikes, pushing its benchmark rate to 3%, as policymakers try to bring inflation back in line with their 2% target.
Hunt said the government had a duty to help the Bank of England control inflation and act responsibly with the country’s finances. The comment was a stark contrast to the message from Truss, who said it was the government’s responsibility to spur growth, setting up an economic showdown between a government with its foot on the accelerator pedal economy and a central bank trying to cool the economy with higher interest rates.
In the United States, inflation slowed to 7.7% in October from 8.2% in September.
But UK inflation has yet to peak.
Food prices rose 16.4% in the 12 months to October – the biggest jump since September 1977 – as supermarkets passed on rising costs to consumers, the ONS said. The cost of electricity and natural gas jumped 24%, even after the government capped energy prices to protect consumers from the impact of the energy crisis.
Shona Lowe, financial planning expert at fund manager abrdn, said inflation was understandably a top concern for most households.
“Unfortunately, the UK is not yet following in the footsteps of the US in terms of slowing inflation,” she said. “In fact, the Bank of England announced last week that it does not expect inflation to come down until the middle of next year, so consumers should be prepared for further pressure on their finances.”
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