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Inflation jumps back above Bank of England’s target

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Inflation has risen back above the Bank of England’s two per cent target, the latest data has shown today

According to the latest figures from the Office for National Statistics (ONS) consumer price inflation (CPI) hit 2.3 per cent in October. 

The figure came in above economists projections. Economists had forecast CPI to come in at 2.2 per cent, up from 1.7 per cent in September.

Higher energy bills pushed the headline figure higher, with regulator Ofgem hiking its price cap on household bills by 9.5 per cent last month.

The latest inflation figures throw a bit of uncertainty over the trajectory of future interest rates.

The Bank of England’s governor Andrew Bailey has warned that services inflation “is easing only gradually” and that a “more substantial fall” is unlikely this year.

Bank of England: Judging the impact of the Budget

Bailey has also suggested policymakers are still waiting to judge the impact measures in Chancellor Rachel Reeves’ first Budget will have on the UK economy.

The central bank raised its inflation forecasts for the next three years after Reeves increased taxes on employers, which business groups have warned could lead to higher prices and a hiring slowdown.

Speaking to MPs at the Treasury Select Committee, governor Bailey said job losses were a realistic prospect.

“I saw the BRC’s (British Retail Consortium’s) letter and I think they’re right to say, I think there is a risk here that the reduction in employment could be more,” Bailey said. “Yes, I think that’s a risk.”

He added that “there will be more pressure on firms’ margins” but they would “probably rebuild those profit margins over time.”

Paresh Raja, CEO of Market Financial Solutions, said: “After years of sky-high inflation, any uptick in the CPI figure is understandably met with a healthy dose of trepidation. But the economy has turned a corner, and inflation will now regularly rise and fall – so long as it hovers close to the two per cent target, smaller shifts are perfectly fine.

“Much of the noise surrounding the monthly inflation data comes down to the impact on interest rates and the cost of borrowing. The Bank of England has signalled its intent to steadily cut rates, and even the fallout from the recent Budget did not derail those plans. There could be one final base rate cut for the year when the Bank next meets in December, and today’s modest CPI uptick ought not to dramatically alter the decision-making progress. Indeed, the expectation remains that the base rate will continue to fall over the coming year.”

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