Food price rises put inflation back above 10%

The Office of National Statistics’ (ONS) Consumer Price Index (CPI) measure of inflation rose to 10.1% in September, returning to its July high with continued steep rises in food and drink prices.

The 0.2 percentage point increase from August’s inflation figure was significantly driven by rising food prices, up 14.5% on September last year, with clothing, hospitality and furniture prices also showing significant increases.

Despite the CPI matching July’s record levels, transport costs showed a decline of 1.5% on the previous month, thanks to falling fuel prices, down in cost for the second consecutive month. While prices are still higher than a year ago, petrol prices fell by 8.7 pence per litre on the month and diesel prices fell by 5.0 pence per litre.

The latest CPI figures continue a trend of high inflation, although the rate of price increases appears to have broadly levelled off. Global price rises have been triggered by rising energy prices, in part exacerbated by sanctions of Russia over its invasion of Ukraine. The conflict in the country is also impacting food prices, due to Ukraine’s role as a major exporter of agricultural staples, particularly grain and cooking oil. The volatility of sterling in recent weeks, coupled with supply chain issues associated with Brexit, has seen the UK among the worst affected developed economies by the current inflation crisis.

September’s CPI figure is used by government to determine inflationary uplifts for state pensions and other benefits the following April. However, it remains to be seen if a 10% rise will be acceptable to the Chancellor, particularly in light of comments made during his emergency statement on Monday regarding the state of public finances.

In order to tackle rising inflation, the Bank of England has established its commitment to continuing to raise interest rates, and its Monetary Policy Committee is expected to meet in early November to vote on increasing the base rate further. A policy of quantitative tightening, selling off government bonds held by the bank to reduce the volume of money circulating in the economy, has also begun.