UK inflation has soared to its highest level in a decade, hitting 5.1 per cent in November, far outstripping expectations.
The level exceeded economists’ expectations that the annual rise in consumer prices would jump from 4.2 per cent in October to 4.8 per cent last month, and was significantly higher than the Bank of England’s expectation that it would step up to 4.5 per cent.
The BoE did not expect the inflation rate to exceed 5 per cent until spring next year.
With the bank’s Monetary Policy Committee announcing its latest interest rate decision on Thursday, the figure alongside strong labour market data would have been enough to prompt a rate rise had the Omicron variant of coronavirus not increased uncertainty in the economy.
Yet the IMF on Tuesday told the BoE not to get bogged down with “inaction bias”, saying it should raise interest rates to prevent inflation becoming ingrained in the UK economy.
The ONS said that the principal reasons for the rise in inflation were petrol prices and second hand car prices, but there were upward contributions to inflation across almost all goods and services, implying broad price pressures across the economy.
Grant Fitzner, ONS chief economist, said: “A wide range of price rises contributed to another steep rise in inflation, which now stands at its highest rate for over a decade”.
“The price of fuel increased notably, pushing average petrol prices higher than we have seen before. Clothing costs — which increased after falling this time last year — along with price rises for food, second-hand cars and increased tobacco duty all helped drive up inflation this month.”