According to the data, the cost of living in the UK has increased by roughly 4.2% in October. This is the highest rate hike in almost a decade, mainly caused by the rising fuel and energy prices.
The consumer price index that measures inflation shows more than double the Bank of England’s target. As a result, the costs of transport, gas and electricity bills and second-hand cars have all been affected.
The inflation has arisen partly as a result of the reopening of the economy after the Covid lockdown. The Bank of England has announced that it might have to increase the interest rates in the coming months to smooth the inflation rate. The rate hikes are much higher than the previous reading in September and the estimations of economists.
The increased household energy bills mostly drive the rates. Since the energy prices started to rise after the energy shortages earlier this year, the households started facing much higher energy bills. The high energy prices have also affected the market of second-hand cars, fuel, restaurants, and hotels. These are only a few of the suffering sectors. The higher cost of raw materials has resulted in substantially higher prices among the factories that produced goods and are now at their highest rates in the least 10 years.
A former member of the Bank of England’s Monetary Policy Committee, Sir John Gieve, has said that the 4.2% inflation rate hike has been higher than the Bank of England and most forecasters had expected. However, he has mentioned that the key point during the time of high inflation is not too thought to be a one-off. According to him, the Bank and other forecasters had anticipated a rise of around 5% till April. They want to stay well above target for the rest of the year.
Rising Energy Costs
According to the ONS, the biggest driver of the high inflation is the household energy bills. The regulatory price cap on domestic gas and electricity had increased substantially during October. Gas bills have had a 28.1% increase during 2021, while electricity had an 18.8% climb. While the global oil market was expiring rate hikes, the Petrol prices experienced a sharp rise. Average pump prices reached their highest rate since September 2012, 138.6 pounds per liter in October. This rate is 25.4 pounds higher than last year’s prices.
The ONS also referred to the rising cost of second-hand cars and mentioned that they are mainly driven by the shortage in the global microchip supply. This shortage has slowed the production of new vehicles, therefore, has pushed up the demand for used cars.