Inflation hits 10.1% as fuel prices drop but food costs grow
The consumer price index rose marginally in September with inflation having reached 10.1% as the fall in fuel prices was largely offset by the rising cost of food.
The current inflation rate is the highest in 40 years. Multiple U-turns on fiscal policy from the UK government have left experts uncertain on the future economic outlook.
Martin Beck, chief economic advisor to the EY ITEM Club, said: “Consumer Price Index inflation rose to 10.1% in September from 9.9% in August, a little above both the consensus and Bank of England forecast of 10%. A rise in food prices (+1.1% month-on-month) made the largest contribution to September’s index, as increases in agricultural prices continued to affect the headline reading. However, this was partly neutralised by declining fuel prices, which fell by 4% in September.
“With energy prices set to rise further in October and upward pressure on the cost of imports from the weak pound, the rise in inflation in September will add to the list of concerns for households and the Monetary Policy Committee. The EY ITEM Club expects the CPI measure to peak at around 11% in October, followed by a more gradual decline than previously anticipated, caused by the recent fall in sterling.
“However, the outlook for inflation beyond the next few months has become more uncertain following the recent fiscal U-turns made by the new Chancellor. On the one hand, a tighter fiscal policy will weigh on demand, so should bear down on inflation in the medium term – as well as putting less pressure on the MPC to raise interest rates aggressively. But on the other, the decision to end the Energy Price Guarantee next April, rather than October 2024, could lead to inflation rising next spring.”
Citizens Advice Scotland’s chief executive, Derek Mitchell, commented: “The Citizens Advice network can offer help and support but what is really needed here is some kind of intervention by government to help people through this crisis. This level of inflation is not normal, and it needs a better than normal response.
“The most positive thing the UK government could do right now is commit to raising benefits to at least match inflation. That would give people on the lowest incomes a measure of security, and I hope the Chancellor will make this commitment in his statement at the end of the month.”