UK inflation has soared to its highest level in 10 years thanks to a rise in fuel and household energy costs.
The Consumer Prices Index (CPI) rose by 4.2% in the year to October, climbing from 3.1% the previous month, the Office for National Statistics revealed on Wednesday.
It marked a bigger rise than economists had expected, the highest since November 2011, adding pressure for the Bank of England (BoE) to hike interest rates.
Inflation now sits at more than double the Bank's 2% target, and is expected to keep climbing to as much as 5% by next April.
As well as rising prices of electricity, gas and other fuels, after the UK’s energy cap was lifted in October, upward pressure also came from areas most affected by supply chain disruptions, including the cost of second hand cars and petrol.
The price of used cars surged by 4.6% during last month, and have rocketed 27.4% since April alone on the back of a semiconductor shortage.
Average petrol prices were 138.6p per litre in October, compared with 113.2p a year earlier, the highest recorded since September 2012.
The ONS added that “restaurants and hotels, education, furniture and household goods, and food and non-alcoholic beverages” also contributed to higher inflation.
“Many countries are experiencing higher inflation as we recover from COVID, and we know people are facing pressures with the cost of living, which is why we are taking action worth more than £4.2bn to help them,” chancellor Rishi Sunak said.
“We're helping people get into work, progress and keep more of what they earn, through our Plan for Jobs and by effectively cutting taxes for workers receiving Universal Credit.
“We are also providing more immediate support, including through the £500m Household Support Fund for the most vulnerable families, fuel and alcohol duty freezes, and the energy price cap.”
Watch: What is inflation and why is it important?
Meanwhile, Hannah Audino, economist at PwC UK said: "High inflation is here to stay in the short-term.
“It will take time for global supply bottlenecks and shortages to normalise and energy prices to stabilise. CPI could peak between 5-6% in Q2 next year as a rise in the energy price cap and the reversal of VAT cuts in hospitality and tourism create the perfect storm for higher consumer prices.”
On Monday, BoE governor Andrew Bailey voiced his concern about the UK’s rising inflation, admitting that he was “very uneasy about the situation”.
Appearing in front of the Treasury Committee he said that growth in the British economy is starting to “flatten out”, meaning that Britain was facing more “two-sided risks” than before.
He pointed to weaker growth on one side, and rising inflation on the other, in the midst of ongoing supply disruptions and an energy crisis that is dampening recovery and pushing inflation even higher.
“I am very uneasy about the inflation situation… I want to be very clear on that.” Bailey said. “It is not, of course, where we want it to be, to have inflation above target.”
The Monetary Policy Committee, which voted by a majority of 7-2 to maintain interest rates at 0.1% this month, is set to meet again in December.
The UK's main interest rate has been at an all-time low of 0.1% since the pandemic began, having been set at 0.75% pre-pandemic.
There was widespread anticipation it would increase to 0.25% this month but Bailey said at the time that there was not enough clear evidence on what had happened to the labour market in the wake of the end of the government’s furlough scheme.
Michael Hewson, chief market analyst at CMC Markets UK, said the decision by policymakers now looks overly cautious.
“Today’s data is a huge embarrassment for the Bank of England, whose procrastination over a modest 0.15% rate rise earlier this month now makes it odds-on that all the pre-Christmas headlines will be of the 'Bank of England steals Christmas' variety - if they do bite the bullet and belatedly nudge rates higher.”
Meanwhile, Sarah Coles, personal finance analyst at Hargreaves Lansdown said: After yesterday’s better-than-expected jobs figures, higher inflation will boost expectations of an interest rate rise even further.
“During the last meeting, the Monetary Policy Committee highlighted unemployment fears as a key reason for sitting on their hands, but yesterday’s jobs figures are likely to have helped ease those fears, with jobs up 160,000, the month after the furlough scheme closed. It may now be ready to unleash the power of a rate rise.”
Watch: Will interest rates stay low forever?