London (Parliament Politics Magazine) – UK inflation saw a rise to 2.6% in November, the highest increase since March, driven by rising costs in clothing, fuel and ticket prices.
The Consumer Prices Index (CPI) hit 2.6% in November from 2.3% in October, fuelled by increasing costs of petrol, groceries, and a tobacco duty rise in the budget.
In line with City economists’ predictions, the ONS report showed inflation rising above the Bank’s 2% target for the second consecutive month.
As reported by the BBC, clothing prices and fuel costs led to the increase, along with a jump in ticket prices for gigs and plays.
Grant Fitzner, the ONS chief economist, stated, “Inflation rose again this month as prices of motor fuel and clothing increased this year but fell a year ago. This was partially offset by airfares, which traditionally dip at this time of year, but saw their largest drop in November since records began.”
Chancellor Rachel admitted that families are still facing problems with the higher cost of living.
She said, “Today’s figures are a reminder that for too long the economy has not worked for working people.”
Mel Stride, shadow chancellor stated, “The chancellor Rachel has made a series of irresponsible and inflationary decisions.”
Paul Dales, chief British economist at Capital Economics, described that the inflation statistics “could have been worse.”
He added that, when combined with Tuesday’s figures revealing faster wage growth, it made a rate cut on Thursday unlikely.
Mr Paul highlighted inflation had decreased more rapidly than predicted in the last year, even with the recent hike.
The statistics revealed from October and November 2024, the average cost of petrol increased by 0.8p to 134.8p per litre, and diesel r by 1.4p to 140.5p. While airfares declined by 19.3% compared to a 13.9% decrease last year.
The Guardian reports that economists believe the latest figures make it almost clear that the Bank of England will maintain interest rates at 4.75% on Thursday, highlighting persistent inflation. Tuesday’s figures revealed annual wage growth had reached 5.2% in October, raising the pressure to lower borrowing costs.
The stock market suggests a 90% chance that rates will remain unchanged.
An economist from the accountancy firm RSM UK stated, “Rising inflation will make the [Bank’s rate-setting] monetary policy committee nervous.”
The economy shows signs of losing steam, as GDP fell by 0.1% in October, declining expectations. Business surveys disclose the sharpest decline in employment levels since the 2009 global financial crisis, excluding the COVID-19 pandemic period.
The Bank of England governor, Andrew Bailey, said the response of businesses and companies to the government’s rise in employer national insurance contributions (NICs) in the Labour’s budget is the economy’s “biggest issue.”
Rachel Reeves, in October stated that employer NIC’s would rise from 13.8% to 15% in April, a measure expected to raise £25bn to fix a “black hole” in public finances caused by the previous government of Conservatives.
Economy experts and business leaders stated the move will put jobs at risk and push employers to increase costs to offset higher prices.
Amid warning that the Chancellor’s budget would increase near-term inflationary pressures, the Bank lowered interest rates for a second time in November to support economic growth.
In December 2021, Threadneedle Street raised borrowing costs to 5.25% from a historic low of 0.1% to address inflation. Though inflation is expected to stay above 2% next year, City economists predict interest rates to fall to 4% by 2025.