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British inflation has jumped to a 41-year high on soaring energy and food bills in a worsening cost-of-living crisis, data showed Wednesday on the eve of a key budget.
The Consumer Prices Index hit 11.1 percent in October, reaching the highest level since 1981, the Office for National Statistics (ONS) said in a statement.
That compared with 10.1 percent in September, which matched the level in July and had already been the highest in 40 years.
Domestic fuel bills rocketed again despite the UK government’s energy price freeze as the market faced more fallout from key producer Russia’s war with Ukraine.
The October figure beat market expectations of 10.7 percent and was higher than the Bank of England’s forecast peak.
“Rising gas and electricity prices drove headline inflation to its highest level for over 40 years, despite the Energy Price Guarantee,” said ONS chief economist Grant Fitzner.
Over the last year, gas prices have leapt by 130 percent and electricity prices by 66 percent, according to the ONS.
Runaway inflation comes despite state energy support, which sought to limit annual energy bills at an average of £2,500 per year.
Finance minister Jeremy Hunt blamed Russian President Vladimir Putin’s war in Ukraine for spiking prices, as well as the easing of pandemic curbs.
Hunt is expected Thursday to hike taxes and slash spending, despite the cost-of-living squeeze, as Prime Minister Rishi Sunak attempts to fix economic chaos wrought by predecessor Liz Truss.
The Ukraine conflict has also sent inflation soaring to the highest level in decades worldwide, sparking economic turmoil.
That has forced major central banks to raise interest rates, risking the prospect of recession as higher borrowing costs hurt businesses and consumers.
The Bank of England this month sprang its biggest rate hike since 1989 to combat sky-high inflation — and warned the UK economy may experience a record-long recession until mid-2024.
The BoE lifted borrowing costs by 0.75 percentage points to 3.0 percent — the highest since the 2008 global financial crisis — to cool UK inflation that it saw peaking at almost 11 percent.
Hunt added that “tough” decisions would be needed in Thursday’s budget to help the BoE meet its 2.0-percent inflation target.
“We cannot have long-term, sustainable growth with high inflation,” he said.
The UK has meanwhile been
blighted by strikes this year, as workers protest over wages that have failed to keep pace with surging inflation.
The retail prices index — an inflation measure which includes mortgage interest payments and is used by trade unions and employers when negotiating wage increases — rocketed to 14.2 percent in October from 12.6 percent in September, data showed Wednesday.
‘Real’ Recession Risk in Some Major Economies
The head of the World Trade Organization (WTO) warned on Wednesday that several major economies face a real risk of sliding into recession as the war in Ukraine, rising food and fuel costs, and soaring inflation cloud the global outlook.
“It may not happen everywhere, but several key countries risk sliding into recession,” WTO Director-General Ngozi Okonjo-Iweala told Reuters on the sidelines of the G20 leaders’ meeting in Bali, Indonesia.
“Of course, the impact of that can be quite significant for emerging markets and poor countries, which need external demand from the developed countries to recover.”
The Geneva-based trade body last month projected global trade to rise just 1.0% in 2023, down sharply from an estimated 3.5% rise for this year.
“There are so many uncertainties and most of the risks are on the downside,” such as the fallout from the war in Ukraine and headwinds from inflation, she said.
Okonjo-Iweala said she has called on G20 leaders to phase out food export restrictions, which have been on the rise and hurt poor countries by pushing up food prices.
