UK inflation has climbed to 2.6% in the 12 months to November, marking the second consecutive monthly increase and sparking fresh concerns for the Labour Government. The figures, released by the Office for National Statistics (ONS), show a rise from 2.3% in October. This renewed inflationary pressure, combined with broader economic challenges, has added to the strain on Prime Minister Keir Starmer's administration.
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The ONS attributed the rise primarily to higher transport and household costs, although a significant dip in airfares helped offset these increases. Airfare prices fell by 19.3% in November, the largest drop on record for the month, driven by steep declines in fares on European routes. Despite this, core inflation, which excludes volatile food and energy prices, rose from 3.3% in October to 3.5% in November, further complicating the Bank of England's efforts to rein in inflation.
Chancellor Rachel Reeves addressed the figures, acknowledging the cost-of-living pressures many families continue to face. 'Real wages have grown at their fastest in three years, which means an extra £20 a week for households after inflation,' she stated. However, she conceded that more work is needed to ease financial burdens and emphasised Labour's commitment to improving living standards through its Plan for Change.
Shadow Chancellor Mel Stride criticised the government's handling of the economy, accusing Reeves of making "irresponsible and inflationary decisions" that have left inflation higher than previously forecasted by the Office for Budget Responsibility. Stride warned that the latest inflationary rise could result in increased costs for households and prolonged higher mortgage rates.
The Bank of England, tasked with maintaining inflation at the government's 2% target, now faces additional challenges as it prepares to announce its next Base Rate decision. Most analysts expect the central bank to hold the rate steady at 4.75% during its Thursday meeting. Daniel Casali, chief investment strategist at Evelyn Partners, noted that the up tick in core inflation makes an interest rate cut highly unlikely. He added that services inflation, closely tied to wage growth, remains a particular concern for policy-makers.
The recent fiscal policies unveiled in the October Budget, including the hike in the National Minimum Wage and changes to Employers' National Insurance contributions, are also contributing to the inflationary landscape. These measures, while aimed at supporting workers, may encourage producers to raise prices to protect profit margins. Casali suggested that the Bank of England's first-rate cuts might be postponed until February or even May 2025, depending on inflation trends.
Mortgage market experts have expressed disappointment with the latest figures. Peter Stimson of MPowered Mortgages remarked that the rise in inflation is "not the Christmas present the Bank of England wanted," warning that borrowers hoping for lower mortgage rates in the New Year may face limited options. Graham Cox, director at Bridging Hub, echoed these sentiments, suggesting that persistent inflation has effectively dashed hopes for an imminent interest rate cut.
The UK economy remains teetering on the brink of recession, with economists warning that stubborn inflation and high interest rates could further hamper growth. As families and businesses continue to grapple with rising costs, all eyes are on the Bank of England and the Labour Government to deliver solutions that restore economic stability without exacerbating the challenges faced by ordinary citizens.
Source: www.express.co.uk