UK inflation reached double digits for the second time this year. Investors are waiting to see how courageous the Bank of England will be with its next move.
In fact, today (19 October), the UK Consumer Prices Index increased by 10.1%, according to figures from the Office for National Statistics.
While this was the opposite of the previous month, when inflation dropped to 9.9%, it was merely a brief blip because economists had previously predicted a rise as higher prices persisted.
In addition, with interest rates predicted to increase further next month, experts said all eyes were now on how the government and Bank of England would respond to the inflation report.
Also, the Bank may raise rates by 75 or possibly 100 basis points to 3-3.25% at its upcoming meeting, according to Daniele Antonucci, chief economist and macro strategist at Quintet Private Bank.
Moreover, looking farther out, Antonucci believes that the developing recession will make it impossible for the Bank to keep up that pace.
However, commentators explained that this morning’s inflation report was a strong indicator of the public’s pricing pressure extending to non-discretionary purchases.
Food and non-alcoholic beverages, which have increased from 13.1% in August, are categories of inflation that “may be even stickier because consumers are habituated to paying it as they form part of essential,” according to Myron Jobson, senior personal financial analyst at Interactive Investor.
Along with occupiers’ housing costs, private rents, electricity and gas costs, and other fuels, Jobson listed housing and household services as “the major contributor to the annual CPI rate in September”.
Some pundits thought these developments would lead to a partnership between the Treasury and the Bank of England in an effort to rebuild trust in the UK market and economy.
Raymond James’ European analyst Jeremy Batstone-Carr claims that it requires “clear, deliberate, and calmly delivered fiscal and monetary policy” that “pours cold water” on inflationary pressures while maintaining economic growth.
The chancellor himself promised on Monday, October 19, in his parliamentary address that he would “assist the most vulnerable while delivering wider economic stability and promoting long-term growth that would aid everyone,” that growth will be delivered despite the market turmoil.
