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| UK inflation hits five-year high of 3 per cent as workers face continued wage squeeze | UK inflation hits five-year high of 3 per cent as workers face continued wage squeeze |
| (35 minutes later) | |
| Inflation rose to a five-year high of 3 per cent in September, far outstripping wage increases, the latest official figures show. | Inflation rose to a five-year high of 3 per cent in September, far outstripping wage increases, the latest official figures show. |
| Consumer price inflation (CPI) increased from 2.9 per cent in August, its highest since April 2012. | Consumer price inflation (CPI) increased from 2.9 per cent in August, its highest since April 2012. |
| Consumers face rising costs for essentials, with food and transport prices driving rising inflation, the Office for National Statistics said on Tuesday. | Consumers face rising costs for essentials, with food and transport prices driving rising inflation, the Office for National Statistics said on Tuesday. |
| Businesses are also facing a squeeze as Retail Price Index inflation, which will be used to set business rates next year, was 3.9 per cent in September. | Businesses are also facing a squeeze as Retail Price Index inflation, which will be used to set business rates next year, was 3.9 per cent in September. |
| Wages rose at an annual rate of 2.1 per cent in the three months to July, meaning workers are seeing the value of their pay packets decrease. | Wages rose at an annual rate of 2.1 per cent in the three months to July, meaning workers are seeing the value of their pay packets decrease. |
| Inflation has risen sharply since the Brexit vote in June last year as the value of the pound has fallen against other major currencies, causing the prices of imports to rise. | Inflation has risen sharply since the Brexit vote in June last year as the value of the pound has fallen against other major currencies, causing the prices of imports to rise. |
| A counterbalancing rise in exports, predicted by some analysts, has not materialised. Rising oil prices and fuel costs also contributed to increasing inflation in September, the ONS said. | A counterbalancing rise in exports, predicted by some analysts, has not materialised. Rising oil prices and fuel costs also contributed to increasing inflation in September, the ONS said. |
| The pound rose against the dollar on Tuesday morning on predictions that rising inflation would increase pressure on the Bank of England to raise its benchmark interest rate at the Monetary Policy Committee’s next meeting on 2 November | The pound rose against the dollar on Tuesday morning on predictions that rising inflation would increase pressure on the Bank of England to raise its benchmark interest rate at the Monetary Policy Committee’s next meeting on 2 November |
| The Bank of England said last month that UK interest rates are likely to rise “over the coming months” in order to curb inflation, preparing the ground for the first rise in the cost of borrowing in a decade. | The Bank of England said last month that UK interest rates are likely to rise “over the coming months” in order to curb inflation, preparing the ground for the first rise in the cost of borrowing in a decade. |
| While a rate hike would mean bigger returns on savers’ bank deposits, it would also mean higher repayment costs for many mortgage borrowers. An increase would also run the risk of choking off overall economic growth, at a time when activity is already weakening markedly because of uncertainty over Brexit. In its latest meeting in September, the Bank’s nine-member Monetary Policy Committee (MPC) voted by a 7-2 margin to keep rates on hold at their record low of 0.25 per cent. | While a rate hike would mean bigger returns on savers’ bank deposits, it would also mean higher repayment costs for many mortgage borrowers. An increase would also run the risk of choking off overall economic growth, at a time when activity is already weakening markedly because of uncertainty over Brexit. In its latest meeting in September, the Bank’s nine-member Monetary Policy Committee (MPC) voted by a 7-2 margin to keep rates on hold at their record low of 0.25 per cent. |
| Laith Khalaf, a senior analyst at Hargreaves Lansdown, said it was "important to keep perspective" on the impact rising prices would have on consumers. | Laith Khalaf, a senior analyst at Hargreaves Lansdown, said it was "important to keep perspective" on the impact rising prices would have on consumers. |
| “The pound in your pocket is depreciating, as the rising price of goods continues to chip away at its value. Consumer spending remains remarkably resilient in the face of inflationary pressures and weak wage growth, but the current squeeze on household budgets is a slow burner, as it takes some time for economic reality to hit home," he said. | “The pound in your pocket is depreciating, as the rising price of goods continues to chip away at its value. Consumer spending remains remarkably resilient in the face of inflationary pressures and weak wage growth, but the current squeeze on household budgets is a slow burner, as it takes some time for economic reality to hit home," he said. |
| "Employment remains high and borrowing costs are low, for the time being at least." | "Employment remains high and borrowing costs are low, for the time being at least." |
| The inflation figure also means that 10.5 million households face losing an average reduction of £450 per year to their benefits as the Government continues a four-year freeze on payments. | The inflation figure also means that 10.5 million households face losing an average reduction of £450 per year to their benefits as the Government continues a four-year freeze on payments. |
| Normally the September inflation figure is used to uprate benefits and tax thresholds the following April. However, the independent Institute for Fiscal Studies pointed out that current government policy is to freeze most working-age benefits in cash terms until March 2020. | Normally the September inflation figure is used to uprate benefits and tax thresholds the following April. However, the independent Institute for Fiscal Studies pointed out that current government policy is to freeze most working-age benefits in cash terms until March 2020. |
| The Trades Unions Congress, which represents millions of British workers, urged the Government to help workers facing falling incomes. | The Trades Unions Congress, which represents millions of British workers, urged the Government to help workers facing falling incomes. |
| TUC General Secretary Frances O'Grady said: "The government needs to face up to Britain’s cost of living crisis. The squeeze on household budgets is getting tighter by the month. | TUC General Secretary Frances O'Grady said: "The government needs to face up to Britain’s cost of living crisis. The squeeze on household budgets is getting tighter by the month. |
| “The Chancellor must use November’s Budget to ease the pressure on hard-pressed families. | “The Chancellor must use November’s Budget to ease the pressure on hard-pressed families. |
| “That means giving five million public sector workers the pay rise they have earned. | “That means giving five million public sector workers the pay rise they have earned. |
| “Prices are sky-rocketing. Offering hard-working public servants below-inflation increases would amount to yet another real-terms pay cut.” | “Prices are sky-rocketing. Offering hard-working public servants below-inflation increases would amount to yet another real-terms pay cut.” |
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