Inflation rose to 2.3% in October, ending a brief stint below the Bank of England’s 2% target.
Analysts had warned of the increase after energy prices surged 10% at the start of October, however the figure still came in slightly higher than the 2.2% forecast.
The rate of price increases is expected to pick up again when November’s figures are released next week, potentially rising to 2.6%.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
“Higher tobacco duties and energy bills will be taking a toll,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
“Our desire for travel has been sending airfares soaring, and with grocery price inflation also heading upwards, policymakers are once again having to deal with a hotter mess of prices,” she added.
Against this backdrop, the Bank of England is unlikely to cut interest rates at the final Monetary Policy Committee (MPC) meeting of the year. Expectations were already low after inflationary measures announced in the Autumn Budget.
The MPC also wants to see further progress with services inflation before racing ahead with rate cuts. The services sector accounts for around 80% of the UK economy, so is a good indicator of whether domestic inflationary pressures are abating.
Services inflation came in at 5% in October, up from 4.9% in September.
Next UK inflation figures
In the UK, the main measure of inflation is the Consumer Prices Index. The Office for National Statistics (ONS) releases this once a month. Two more reports are due for 2024.
Release dates for 2024
- 18 December (covering November)
- 15 January 2025 (covering December)
Release dates for 2025
- 19 February (covering January)
- 26 March (covering February)
- 16 April (covering March)
- 21 May (covering April)
- 18 June (covering May)
- 16 July (covering June)
- 20 August (covering July)
- 17 September (covering August)
- 22 October (covering September)
- 19 November (covering October)
- 17 December (covering November)
- 21 January 2026 (covering December)
What time is CPI released in the UK?
Each month, the ONS releases the latest CPI data at 07:00. You can access the data by going onto the ONS website and clicking on its release calendar. All published and upcoming releases are listed there.
The report will be titled, “Consumer price inflation, UK”, followed by the month and year in question.
MoneyWeek regularly reports on the latest inflation data and what it means for you.
What is CPI and how is it calculated?
As introduced previously, CPI is the main measure of inflation used in the UK. It tells you how much the cost of living is going up or down.
It is calculated using a typical basket of household goods and services – from eggs, flour and milk to hotel costs, vinyl records and air fryers. Vinyl records are a recent addition, back in the CPI shopping basket for the first time since 1992 after a resurgence in popularity.
The Bank of England keeps a close eye on CPI when setting interest rates. If inflation is too high, the Bank raises interest rates to slow consumer spending and cool the economy. This works in bringing prices down because households have less money to spend when mortgage rates are high and debts are more expensive to repay.
Meanwhile, if inflation is too low, the Bank may reduce interest rates so that consumers have more disposable income to spend. Thanks to the laws of supply and demand, this pushes prices back up.
Where is inflation heading next?
The path ahead is unlikely to be completely straight. The Bank of England has said it expects inflation to “edge up to about 2.75% towards the end of the year before falling again”.
Meanwhile, the Office for Budget Responsibility (OBR) expects inflation to average out at 2.5% in 2024 and 2.6% in 2025. It then expects it to fall to 2.3% in 2026, 2.1% in 2027, 2.1% in 2028 and 2% in 2029.
Political factors are expected to add to inflationary pressure going forward. In her Budget last month, chancellor Rachel Reeves announced £70 billion in spending policies and £40 billion in tax hikes. One of the main measures announced was an increase to employer National Insurance contributions, which could translate into higher inflation if businesses put prices up to protect their margins.
The National Living Wage will also go up by 6.7% from April – good news for workers but another cost for businesses. Wage growth is a big driver of inflation, and something the Bank of England has been watching closely when deciding when (and how far) to cut interest rates.
Overall, the fiscal watchdog has said it expects Budget policies to push inflation up by 0.4%, once they hit peak effect.
Looking further afield, there are also concerns about what Donald Trump’s second presidency might mean for global trade. Decisions made in the US could have a large impact on prices in the UK and elsewhere across the globe.
Some point out that Trump’s bark is often worse than his bite. However, analysis from the National Institute of Economic and Social Research (NIESR) suggests UK inflation could be 3-4 points higher over the next two years, if Trump imposes the tariffs that have been threatened.
-
Why undersea cables are under threat – and how to protect themUndersea cables power the internet and are vital to modern economies. They are now vulnerable
-
Vanguard to bring in £4 minimum monthly fee - is it still a cheap deal?Vanguard is overhauling its charges, with DIY investors set to pay more from January. How will the fees compare to its rivals, and what should customers do?
