By DANICA KIRKA, Associated Press
LONDON (AP) — Britain’s inflation rate rose to a 41-year high in October, fueling demands for the federal government to do more to ease the nation’s cost-of-living crisis when it releases latest tax and spending plans on Thursday.
Consumer prices jumped 11.1% within the 12 months through October, compared with 10.1% in September, the Office for National Statistics said Wednesday. The October figure exceeded economists’ expectations of 10.7%.
Higher prices for food and energy drove Britain’s inflation rate to the best since October 1981, the ONS said.
The figures come a day before Treasury chief Jeremy Hunt is scheduled to unveil a latest budget amid growing calls for higher wages, increased advantages and more spending on health and education as raging inflation erodes the spending power of individuals across the country.
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Those demands are complicating Hunt’s efforts to shut an estimated 50 billion-pound ($59 billion) budget shortfall and restore the federal government’s financial credibility after former Prime Minister Liz Truss’s disastrous economic policies undermined investor confidence and sparked turmoil on financial markets.
“We cannot have long-term, sustainable growth with high inflation,” Hunt said after the inflation figures were released. “Tomorrow I’ll set out a plan to get debt falling, deliver stability, and drive down inflation while protecting probably the most vulnerable.”
Governments and central banks all over the world are struggling to contain widespread inflation that began to speed up as the worldwide economy recovered from the coronavirus pandemic, then soared after Russia’s invasion of Ukraine restricted supplies of natural gas, oil, grain and cooking oil. While there’s little policymakers can do to combat such external shocks, those price increases have gotten embedded as producers pass their costs on to consumers and staff demand higher wages, posing a long term threat to economic growth.
The Bank of England earlier this month forecast that U.K. inflation would peak at around 11% within the fourth quarter and start falling early next 12 months. The bank has approved eight consecutive rate of interest increases, pushing its key rate to three%, as policy makers attempt to bring inflation back according to their 2% goal.
Hunt said the federal government had an obligation to assist the Bank of England control inflation and act responsibly with the nation’s funds. The comment was a stark contrast to the message from Truss, who said it was the federal government’s responsibility to spur growth, establishing an economic tug-of-war between a government with its foot on the economic gas pedal and a central bank attempting to chill the economy with higher rates of interest.
Within the U.S., inflation slowed to 7.7% in October from 8.2% in September.
But U.K. inflation has yet to peak.
Food prices rose 16.4% within the 12 months through October — the most important jump since September 1977 — as supermarkets passed on rising costs to consumers, the ONS said. The price of electricity and natural gas jumped 24%, even after the federal government capped energy prices to shield consumers from the impact of the energy crisis.
Shona Lowe, a financial planning expert on the fund manager abrdn, said that understandably, inflation was a top concern for many households.
“Unfortunately the U.K. just isn’t yet following within the footsteps of the US in relation to inflation easing,” she said. ”In truth, the Bank of England announced last week that it doesn’t expect inflation to fall until the center of next 12 months, so consumers need to arrange for further pressure on their funds.”
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