UK inflation rose more than expected last month, exceeding the Bank of England’s target and potentially halting further interest rate cuts.
Annual consumer price inflation rose to 2.3% in October from 1.7% in September, which was the lowest reading since April 2021, higher than the 2.2% expected.
The monthly rate rose 0.6%, a jump from the flat reading the previous month.
The core CPI, which excludes volatile energy and food prices, rose 0.4% month-on-month, meaning the annual rate rose to 3.3% from 3.2% the previous month.
The annual core figure was already expected to fall to 3.1% in October.
While the annual headline figure is still below the 11% that peaked two years ago after the outbreak of the Ukraine war, the fact that it has risen strongly above the Bank of England’s 2% target in the medium term could prove problematic for the central bank given the huge increases in public spending. In the budget.
The Bank of England raised its inflation forecasts for the next three years after the October 30 Budget, which increased taxes on employers, threatening to push up prices and wages.
Markets were anticipating around four interest rate cuts by the BoE by the end of 2025 before the budget, but those bets have narrowed to between two or three since the budget and the election of Donald Trump as US president.
The next meeting of the Bank of England’s Monetary Policy Committee, the group that sets the country’s benchmark interest rate, is in December, and this inflation reading is likely to dampen expectations of a rate cut then.
