Rising energy and food bills tip inflation to highest level since 1981 at 11.1%

Rising energy and food bills tip inflation to highest level since 1981 at 11.1%

There has been a higher than expected leap in the rate of inflation, to a 41-year high of 11.1% last month, led by the latest rise in energy bills.

The Office for National Statistics (ONS) revealed the increase, from 10.1% in September, as the cost of light and heating for homes rose further despite help from the government’s energy price guarantee that limits wholesale charges for gas and power.

Food was cited as the other major element adding inflationary pressure during October.

The ONS estimated that the 11.1% reading was the highest since October 1981.

It added that prices rose between September and October 2022 by as much as they did in the entire year to July 2021.

Economists polled by Reuters had expected the rate of inflation to rise to 10.7%.

Surging energy prices have been the main driver of the cost of living crisis – mostly a consequence of Russia’s invasion of Ukraine in February.

More on Cost Of Living

Wholesale costs currently remain below their conflict era peaks, raising hopes that the worst inflation is behind us.

However, there remains a lack of clarity on the support for bills beyond April, when the energy price guarantee will be reviewed. Further information could come in the chancellor’s autumn statement to MPs due on Thursday.

The Bank of England had warned that inflation would have surged above 13% last month without the government energy bill intervention as average annual bills under the Ofgem-set price cap would have skyrocketed to around £3,450.

Policymakers were tipped, by financial markets, to impose a further 0.5 percentage points increase to Bank rate when its rate-setting committee meets again this month.

That would take the rate to 3.5%.

But the higher than expected inflation figure could mean a more aggressive rate rise is considered – piling further misery on borrowers.

The Bank has signalled that curbing inflation is its priority despite revealing last month that it expected the country was already in recession.

Official figures last week showed the economy contracted by 0.2% in the three months to September.

The Bank has raised the prospect of seven further quarters of negative growth.