Inflation increased in Britain, now the highest in 41 years

London:

British inflation has hit a 41-year high on rising energy and food bills in a worsening cost-of-living crisis, data showed on Wednesday on the eve of a crucial budget.

The consumer price index rose to 11.1 per cent in October, the highest level since 1981, the Office for National Statistics (ONS) said in a statement.

That compared to 10.1 percent in September, which matched July’s level and was already the highest in 40 years.

Domestic fuel bills soared again despite the UK government freezing energy prices as the market suffered further downside from Russia’s invasion of major producer Ukraine.

October’s figure beat market expectations of 10.7 percent and was higher than the Bank of England’s forecast peak.

“Rising gas and electricity prices have pushed headline inflation to a 40-year high, despite energy price guarantees,” said Grant Fitzner, chief economist at the ONS.

According to the ONS, gas prices have risen by 130 per cent and electricity prices by 66 per cent in the past year.

The runaway inflation comes despite state energy support, which sought to cap annual energy bills at an average of £2,500 per year.

Finance Minister Jeremy Hunt blamed Russian President Vladimir Putin’s war in Ukraine for the rise in prices as well as the easing of pandemic restrictions.

‘Difficult’ decisions

Hunt is expected on Thursday to raise taxes and slash spending, despite Prime Minister Rishi Sunak attempting to fix the economic chaos wrought by predecessor Liz Truss.

“Post-Covid shocks and Putin’s invasion of Ukraine are driving inflation higher in the UK and around the world,” Hunt said on Wednesday.

“It … is eating away at pay cheques, household budgets and savings, thwarting any chance for long-term economic growth.”

The Ukraine conflict has pushed inflation around the world to the highest level in decades, causing economic turmoil.

This has forced major central banks to raise interest rates, risking the prospect of a recession. Higher borrowing costs have hurt businesses and consumers.

The Bank of England this month delivered its biggest rate hike since 1989 to tackle skyrocketing inflation – and warned Britain’s economy could experience a record-long recession by mid-2024.

The BoE raised borrowing costs by 0.75 percentage points to 3.0 percent – the highest since the 2008 global financial crisis – to ease UK inflation that peaked at nearly 11 percent.

Hunt said “difficult” decisions would be needed in Thursday’s budget to help the BoE meet its 2.0-percent inflation target.

“We cannot have long-term, sustainable growth with high inflation,” he said.

Meanwhile the UK has been scarred by strikes this year, as workers protest over wages that have failed to keep pace with rising inflation.

The retail price index – an inflation measure that includes mortgage interest payments and is used by trade unions and employers when negotiating wage increases – rose to 14.2 percent in October from 12.6 percent in September, data showed on Wednesday.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)