Inflation in Britain rose to its highest level in nearly a decade in October after soaring energy prices hit household bills.
The Consumer Price Index rose 4.2 percent from a year earlier, the highest since November 2011, and up from 3.1 percent in September, the Office for National Statistics said on Wednesday. The price increases were more than twice the central bank’s target of 2 percent, increasing the likelihood that policymakers will go ahead with the interest rate increases they have signaled are coming.
The biggest contributor to higher inflation was a surge in energy costs, including wholesale natural gas, which has caused nearly two dozen energy suppliers in Britain to collapse and disrupted manufacturers. The cap on energy bills, which protects about 15 million households, was raised 12 percent in October.
Other large contributors were higher prices for gasoline and at hotels and restaurants, the statistics agency said.
The Bank of England has said it expects inflation to peak at about 5 percent in the spring. “This period of higher inflation is likely to be temporary,” Andrew Bailey, the central bank’s governor, said this month. But there is “no fixed unit of time” that defines transitory, he said.
The central bank said that “it would be necessary over coming months” to raise interest rates if the economic data played out as policymakers anticipated, especially if the end of the government’s furlough program didn’t result in a large increase in unemployment. In the three months through September, the unemployment rate was 4.3 percent, 0.2 of a percentage point lower than in the three months through July, and early payroll data indicated that only a small number of people lost their jobs in October when the furlough program expired.
As the global economy emerged from successive lockdowns over the past year, supply bottlenecks, labor market shortages and other shortages have disrupted supply chains around the world. Policymakers are warning that the supply problems and the higher prices that result will last longer than they initially expected, adding pressure on central bankers to act more aggressively to stop inflation from getting out of their control.
In the United States, the Consumer Price Index jumped 6.2 percent in October from a year earlier, the fastest annual increase since 1990, and prices rose 4.1 percent in the eurozone last month, the fastest in 13 years. In China, the prices wholesalers pay to producers climbed to the highest in 26 years amid rising commodity prices and power shortages.