The UK's Consumer Price Index (CPI) was shown to have jumped by 5.1% in November in a year-over-year spike, rising from the 4.2% recorded in October.
An economist says the outlook suggests the Bank of England may have to act, though the Omicron situation could complicate things.
UK’s inflation soared by 5.1% over the past year to November, up from October’s 4.2% and hitting a ten-year high as data showed consumers have continued to bear the brunt of higher prices. Last week, US inflation data showed a 6.8% spike year on year in November to hit its fastest rate in nearly four decades.
Data released by the Office for National Statistics show that inflation had increased at its fastest pace year over year since September 2011.
The spike is steeper than expected, surging higher than the 4.7% estimated by economists and beating by more than double the Bank of England’s target of 2%.
In November, UK inflation surged by 0.7%, which was higher than economists’ target of 0.4%, and is expected to stay above the central bank’s 2% target over the next two years.
Bank of England rate rise complicated by Omicron- economist
The inflation readings come ahead of the BoE’s Monetary Policy Committee meeting on Thursday. As with other major central banks like the Fed and the European Central Bank (ECB), the UK central bank is expected to highlight its tightening monetary policy plans.
The MPC surprised investors when it resolved to keep interest rates at the record low of 0.1% in November. While the market might be keener on a decision from the central bank, concerns around a new Covid-19 strain could play against a hike before Q1.
According to Resolution Foundation senior economist Jack Leslie, this might be the outlook given prices are surging faster than wages, and the virus only adds to the pressure on consumers.
“Another big rise in the latest inflation statistics – annual CPIH inflation rose to 4.6% (the highest rate since 2008) and CPI inflation hit 5.1%. This [plus] low unemployment, definitely suggests a Bank of England rate rise, but Omicron complicates things a lot,” he noted.
Leslie says that with Omicron’s economic costs “already clear”, what policymakers need is to find ways of protecting from further inflation-triggered pain.
Another big rise in the latest @ONS inflation statistics – annual CPIH inflation rose to 4.6% (the highest rate since 2008) and CPI inflation hit 5.1%. This + low unemployment, definitely suggests a Bank of England rate rise, but Omicron complicates things a lot. Short thread… pic.twitter.com/C9SwsqzVSw
— Jack Leslie (@jackhleslie) December 15, 2021
The ONS data shows that consumers paid more over the last month heading into the holiday season compared to November 2020. Prices were higher across major sectors of the economy, including travel, energy, food, clothing, and household services.
In the markets, Tuesday’s drawdown could get fresh momentum if the week gets to end on a negative note arising from key decisions of the Fed, BoE, and ECB.