UK Inflation Sticks at 3%

Consumer Price Index inflation was 3% for October - the same rate as September. This is the ninth consecutive month that inflation is above the 2% target

Emma Wall 14 November, 2017 | 10:10AM
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Inflation in the UK has failed to hit the target rate of 2% yet again, as the Office for National Statistics revealed data for October. The latest Consumer Price Index shows inflation running at 3% last month. 

Food inflation is even higher at 4.1%, the highest rate since September 2013, putting pressure on elderly households. 

"Prices for food and non-alcoholic beverages made the largest upward contribution to change in the rate between September and October 2017, increasing by 0.4%, having fallen by 0.5% a year ago," the report states. 

Alongside food costs, transport provided a significant tailwind to inflation. The catergories which saw falling prices included motor fuel and furniture costs.

This is the ninth consecutive month in which inflation has run ahead of the 2% target in the UK, putting pressure on the Bank of England to raise interest rates in order for savers to earn a real rate of return on their cash.

Earlier this month, the Monetary Policy Committee, led by Chairman Mark Carney, raised interest rates for the first time in more than a decade. After the meeting, Carney indicated to journalists that the UK could expect two more rate rises in by the end of 2019. He favours a slow and steady approach, with small rate increments. 

Kate Smith, head of pensions at Aegon questioned the impact of that approach on households.

“People are facing a triple whammy of squeezes in their purse, with inflation still running high, rising interest rates and little sign of real wage increases for the majority of workers,” she said today. “This combination of factors is putting a strain on households and inevitably makes saving a challenge.”

Investors Concerned by Inflation

A study by Rathbones released today shows that investors consider inflation and low interest rates to be more of a threat to their wealth than Brexit.

Four in 10 investors feel their portfolio returns are being threatened by above-target inflation – with 26% saying that it has already impacted their savings.

Rathbones Robert Szechenyi said: “This period of high inflation has left many facing a squeeze on their savings. And with over a quarter of savers surveyed already reporting a negative effect from the rise, evidently action needs to be taken by savers and investors in order to combat the effects of rising inflation.”

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Emma Wall  is former Senior International Editor for Morningstar

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