Could this sway next month's Bank of England base rate decision?
UK annual inflation hit 2.3% in October 2024, up from 1.7% in the previous month and above the government’s 2% target once again.
Data released by the Office for National Statistics (ONS) on Wednesday also showed that, on a monthly basis, the Consumer Price Index (CPI) rose by 0.6% in October 2024, up from being little changed in October 2023.
The ONS reported that the largest upward contribution to the monthly change in CPI annual rates came from housing and household services, mainly because of electricity and gas prices, while the largest offsetting downward contribution came from recreation and culture.
“Inflation rose this month as the increase in the energy price cap meant higher costs for gas and electricity compared with a fall at the same time last year,” said Grant Fitzner, ONS chief economist. “These were partially offset by falls in recreation and culture, including live music and theatre ticket prices.
“The cost of raw materials for businesses continued to fall, once again driven by lower crude oil prices.”
The cost of raw materials fell 2.3% in the year to Oct 2024, down from a revised decrease of 1.9% in the year to Sept.
— Office for National Statistics (ONS) (@ONS) November 20, 2024
Meanwhile, factory gate prices fell 0.8% in the year to Oct, down from a revised decrease of 0.6% in the year to Sept.
➡ https://t.co/VlLGjqzkw9 pic.twitter.com/BRlTtTulpp
“Inflation rising isn’t the best start to the festive season for those looking to remortgage or get on to the property ladder,” commented Ben Thompson, deputy chief executive at Mortgage Advice Bureau. “With inflation rising, and the Bank of England signalling its restraint in cutting the interest rate, it is possible that mortgage rates could stay higher for longer.
“Ultimately, the good news is that we’re nowhere near the highest levels of inflation and mortgage rates seen in the past two years. There remain good deals to be had, and buyers should be wary of trying to time the market. Now is as good a time as any to begin the process of getting mortgage ready by speaking with an adviser.”
For Paul Noble, chief executive of Chetwood Bank, the latest inflation data is untimely, especially as the market heads into the festive season.
“However, it’s worth bearing in mind that inflation is still markedly lower than it was at the same point 12 months ago and the bank base rate is still above inflation,” he pointed out. “What’s more, there are strong opportunities in the savings market for those looking to make their money work harder over the festive period and into 2025.
“Nevertheless, today’s figures are also a timely reminder to the banking sector that banks must do everything they can to support consumers and help ease their worries over festive spending as we move towards one of the most expensive and financially testing times of the year.”
Paresh Raja, chief executive of Market Financial Solutions, noted that after years of sky-high inflation, any uptick in the CPI figure is understandably met with a healthy dose of trepidation.
“But the economy has turned a corner, and inflation will now regularly rise and fall – so long as it hovers close to the 2% target, smaller shifts are perfectly fine,” he stressed.
“Much of the noise surrounding the monthly inflation data comes down to the impact on interest rates and the cost of borrowing. The Bank of England has signalled its intent to steadily cut rates, and even the fallout from the recent Budget did not derail those plans.
“There could be one final base rate cut for the year when the bank next meets in December, and today’s modest CPI uptick ought not to dramatically alter the decision-making progress. Indeed, the expectation remains that the base rate will continue to fall over the coming year.”
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