Inflation Surge and Its Causes
In October, the 's inflation rate rose to 2.3%, marking a six-month high and exceeding the 's (BoE) 2% target, primarily driven by higher domestic energy bills and a notable increase in airfares.
The rise in energy prices was attributed to a 10% increase in Ofgem's utility price cap, while the surge in airfares inflation was the largest since record-keeping began in 2001, indicating significant pressure on the consumer price index (CPI).
Interest Rate Forecast and Economic Implications
The unexpected inflation uptick has led to expectations that the Bank of England will refrain from further interest rate cuts in December, with analysts predicting a cautious approach due to the inflation's persistence in core and services sectors.
Economists foresee the BoE maintaining higher interest rates for an extended period, potentially above 3% in early 2025, influenced by recent budget measures, global uncertainties, and the prospect of inflationary pressures from a second Trump presidency.