Increasing energy and food costs cause inflation to reach its highest level since 1981, 11.1%.

In October, the inflation rate increased far faster than economists anticipated. Putting pressure on the Bank of England to sustain the rate of interest rate hikes to restrain economic demand. The inflation rate increased to an all-time high of 11.1% last month, driven by the latest increase in energy costs.

The Office for National Statistics reported the rise, up from 10.1% in September, as the cost of light and warmth for homes continued to rise despite the government’s energy price guarantee. Which controls wholesale rates for gas and electricity.

Food becomes an additional contributor

The other main contributor to inflationary pressure in October was food. Which increased at the quickest annual rate since 1977. In addition, prices grew by the same amount between September and October 2022 as they did from July 2021 to July 2022. Reuters polled economists who anticipated a rise in inflation to 10.7%, which would have been nearly double the rate of wage growth.

Soaring cost of living caused by Russia’s invasion of Ukraine

The primary cause of the cost of living crisis has been soaring energy prices, primarily due to Russia’s invasion of Ukraine in February. Which drove up the price of several food stocks, such as wheat. And the cost of producing them.

Wholesale energy costs are below their wartime peaks, fostering optimism that the worst of inflation has passed.

Beyond April, when the price guarantee will be reassessed, there still needs to be more certainty on the support for energy bills. Thursday’s scheduled chancellor’s autumn statement to the House of Representatives could contain additional information.

Safeguarding the vulnerable, but at a cost

Jeremy Hunt is expected to safeguard the most vulnerable by increasing benefits and pensions in step with inflation, but he has warned that we all face more outstanding taxes to balance the budget.

At a news conference during the G20 Summit in Bali, the prime minister of Nepal, Rishi Sunak, stated, “My number one priority is to ensure that we address the economic issue at home.

“With more inflation-related news surfacing today, it’s the top topic of conversation. The thing that causes the most anxiety is opening your bills and receiving emails with increased rates. Therefore, it is appropriate that we grasp it.”

Inflation could have risen above 13% had the government not intervened

The Bank of England anticipated that inflation would have risen above 13% last month if the government had not intervened in the energy bill market, as typical yearly bills under the Ofgem-set price cap would have skyrocketed to almost £3,450.

Financial markets predicted that policymakers will hike the Bank rate by an additional 0.5 percentage points when the rate-setting committee meets again next month. That would bring the rate to 3.5%.

Nonetheless, the higher-than-anticipated inflation rate could result in a more aggressive rate hike, adding to the 0.75 percentage point increase in November.

Britain could be on its way to a recession

Despite disclosing last month that it believed the nation to be in recession, the Bank has signalled that containing inflation is its top concern.

In the months leading up to September, the economy fell by 0.2%, according to data released last week. The Bank has projected seven additional quarters of negative growth.

Rachelle Earwaker, the senior economist at the Joseph Rowntree Foundation, which focuses on living standards, commented on the pessimism: “The expense of living leaves millions fearful for the future, which is exacerbated by soaring price increases for food, transportation, and energy.

Increasing energy and food costs are causing people to sell valuables to get by

Every day, more and more people are forced to sell their goods or borrow money at exorbitant interest rates to finance these necessities.

David Brier, head of research for the British Chambers of Commerce, stated that “additional ONS data covering factory gate pricing indicated that inflation had not reached its peak.”

“Thousands of firms tell us that this is unsustainable,” he stated. “According to our data, trust is rapidly declining as many SMBs find it nearly impossible to absorb or pass on increased costs.

“While the Bank of England strives to contain inflation by future interest rate hikes, this blunt instrument fails to address the underlying causes of inflation for most businesses: skyrocketing energy costs, global supply chain disruption, and growing staff expenses due to labour shortages.

“Before tomorrow’s fall statement, businesses will require a clear plan from the chancellor to stimulate corporate investment and growth, as well as tailored measures to alleviate the specific causes of inflation.

Otherwise, the British economy faces a fatal recession and out-of-control inflation. Increasing energy and food costs are at an all time high, please know help is available.