Food and fuel prices push UK inflation to 10-year high
UK inflation was at a 10-year high in the 12 months to November, thanks to rising fuel prices, clothing costs and price rises for food.
A price hike in second-hand cars and increased tobacco duty also helped push up the consumer prices index (CPI), which rose by 5.1%, up from 4.2% in October, the ONS said.
Average petrol prices were higher than ever seen before.
“A wide range of price rises contributed to another steep rise in inflation, which now stands at its highest rate for more than a decade,” said ONS chief economist Grant Fitzner.
“The costs of goods produced by factories and the price of raw materials have continued to increase significantly to their highest rate for at least 12 years.”
This comes as the Bank of England gears up for a key vote on Thursday on when to hike interest rates in the face of high inflation. The IMF on Tuesday urged the central bank to avoid “inaction bias”.
In a report on the health of the UK economy, the IMF said it expects inflation to peak at about 5.5% in the spring of 2022, before gradually returning to target of 2% by early 2024.
Read more: IMF warns UK may have to bring back furlough scheme amid Omicron threat
“Inflationary pressures are expected to intensify in the near term as the rising cost of imported raw materials, higher energy prices and the reversal of the VAT reduction for hospitality and tourism drives inflation materially higher by the middle of 2022," said head of economics at the British Chambers of Commerce, Suren Thiru.
He said if inflation continues to outpace wages, real household incomes will be squeezed further, dampening consumer spending, and weakening overall economic activity.
The new Omicron COVID variant could accelerate the current surge in inflation if restrictions around the world to combat the new variant triggers more supply chain disruption.
As for the Bank of England's meeting, he said December interest rate rise remains improbable given concerns over the new strain.
"While rates will rise sooner rather than later, with the current inflationary spike mostly driven by global supply constraints and price pressures, higher rates will do little to curb further price rises."
