Jump in bills drives slight increase in CPI growth in October, with Bank likely to stick to cautious approach to rate cuts.
UK inflation rose slightly more than expected to 2.3% in October on the back of a jump in energy prices.
Consumer Price Index (CPI) growth had slowed to 1.7% the previous month, raising some hopes of quicker than expected rate cuts.
Today’s figures show that the Bank of England (BoE) is likely to stick to its message of cautious rate cuts, according to investment teams at wealth managers. The Bank cut rates earlier this month to 4.75%.
‘Whether October’s uptick in inflation proves to be just a blip remains to be seen, however it seems more likely that the Bank may err on the side of caution in coming months as a growing list of inflationary risks emerge on the horizon,’ said Lindsay James, investment strategist at Quilter Investors.
George Lagarias, chief economist at Forvis Mazars, said today’s CPI was a sign of ‘more bills, less fun’ as prices rose across everything other than recreation.
‘New initiatives will have to be undertaken if headline inflation is to stabilise around or below 2%, at a time when BoE is more concerned about growth and has entered a rate cut trajectory,’ he said.
‘We think it is very unlikely that the BoE will cut rates in December, especially after this release, and we wouldn’t be surprised to see rate expectations for the end of 2025 tilting on the upside again.’
Charles Walmsley (CityWire)