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UK inflation hits 10-year high, bolstering rate hike bets
CGTN
People shop at market stalls, with skyscrapers of the City of London financial district seen behind, amid the COVID-19 pandemic in London, UK, January 15, 2021.

People shop at market stalls, with skyscrapers of the City of London financial district seen behind, amid the COVID-19 pandemic in London, UK, January 15, 2021.

Inflation in the UK surged to a 10-year high last month as household energy bills rocketed, data showed Wednesday, bolstering expectations that the Bank of England (BoE) will raise interest rates next month.

Consumer prices rose by 4.2 percent in annual terms in October, leaping from a 3.1-percent increase in September. Both the BoE and a Reuters poll of economists – none of whom had predicted such a big increase – had pointed to a reading of 3.9 percent.

"Today's inflation data will reinforce the Bank of England's resolve to act," Yael  Selfin, chief economist at KPMG UK, said.

The Office for National Statistics said household energy bills were the biggest driver of inflation following the lifting of a regulatory cap on bills last month, with gas prices paid by consumers increasing by 28.1 percent in the year to October.

"A substantial winter surge in inflation remains probable with the rising cost of imported raw materials and higher energy prices likely to lift inflation to around 5 percent next year," said Suren Thiru, head of economics at the British Chambers of Commerce.

The BoE is expected to become the first of the world's major central banks to raise rates since the coronavirus pandemic swept the global economy, with investors and economists increasingly predicting that will happen on December 16.

On Monday, BoE Governor Andrew Bailey said he was "very uneasy" about the inflation outlook and that his vote to keep rates on hold earlier this month, which shocked financial markets, had been a very close one.

On Tuesday, data suggested Britain's labor market was withstanding the end of the government's job-protecting furlough scheme, a key factor for the BoE and its decision on rates.

There were signs in Wednesday's data of further inflation pressure in the pipeline. Prices charged by factories rose by more than expected, up 8 percent compared with October 2020, the sharpest increase since 2011.

Manufacturers' input costs jumped by 13 percent, the most since 2008, the Office for National Statistics said.

Inflation worries spread through economies

Across the European Union, the inflation rate rose to 4.1 percent in the year through October fanned by rising energy prices, up from September's equivalent rate of 3.4 percent, reaching the highest level since 2008, according to Eurostat, the EU statistics agency.

A week earlier, U.S. Federal Reserve also said concerns over higher inflation and tighter monetary policy have become the top concern for market participants, pushing aside the COVID-19 pandemic.

According to U.S. Labor Department, U.S. consumer prices accelerated in October as Americans paid more for gasoline and food, leading to the biggest annual gain in 31 years. The consumer price index jumped 0.9 percent last month after climbing 0.4 percent in September, seeing the largest gain in four months hoisted the annual increase in the CPI to 6.2 percent – the biggest year-on-year rise since November 1990.

(With input from Reuters)

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