THE UK’s rate of inflation hit 10.1% in September driven by soaring food and energy prices.
The data from the Office for National Statistics (ONS) reveals the rate went up in September from 9.9% in August and is now back to a 40-year high.
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Inflation last hit 10.1% back in July – the biggest rise in inflation since 1997.
This drew fears from the Bank of England (BoE) Governor that the UK economy could be heading for a 15-month recession.
The BoE predicts that inflation will peak at 11% in October and then remain above 10% for a few months after.
Martin Sartorious, principal economist at the CBI, said: “Inflation returned to its recent 40-year high and is expected to grow further in October as energy bills rise in line with the government’s Energy Price Guarantee.”
Inflation is what goods and services are worth in a country.
If it is higher, that means everyday essentials such as food are more expensive.
Rising food prices were the major factor which drove inflation up between August and September 2022.
Food and non-alcoholic beverage prices rose by 14.6% in the 12 months to September 2022, up from 13.1% in August.
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The current rate is estimated to be the highest since April 1980.
But the continued fall in the price of motor fuels has helped keep inflation lower than it if prices remained high, according to the ONS.
Commenting on today’s inflation figures, ONS director of economic statistics, Darren Morgan said: “After last month’s small fall, headline inflation returned to its high seen earlier in the summer.
“The rise was driven by further increases across food, which saw its largest annual rise in over 40 years, while hotel prices also increased, after falling this time last year.”
The soaring rate reflects the current cost of living crisis, with millions of people struggling with rising energy bills, petrol prices and grocery costs.
The rate of inflation is usually used to uprate annual benefit payments each April – however, it’s unclear as to whether benefits will rise in line with this month’s inflation figures next year.
The same uncertainty remains for pensioners after the government failed to commit to reinstating the triple lock yesterday.
It’s now estimated that if pension payments don’t rise in line with inflation, millions could lose up to £12,296 over the next 20 years.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown said: “Under today’s CPI inflation figure the new state pension will soar 10.1% giving pensioners a weekly income of over £200 per week.
“To be denied such an increase would come as a bitter blow to the many pensioners who rely on state pension as the foundation of their retirement income.”
In response to today’s inflation figures chancellor of the exchequer, Jeremy Hunt said: “I understand that families across the country are struggling with rising prices and higher energy bills.
“This government will prioritise help for the most vulnerable while delivering wider economic stability and driving long-term growth that will help everyone.
“We have acted decisively to protect households and businesses from significant rises in their energy bills this winter, with the government’s energy price guarantee holding down peak inflation.”
What does it mean for my money?
Rising inflation indicates that the cost of goods and services is rising, so your money won’t count for as much as it did before.
When inflation dropped to 9.9% in August, households saw their cash go a tad further.
But with the rate now at 10.1%, your cash won’t go as far.
Prices on everyday items such as food and petrol will remain high for now though, as 10.1% is still historically high.
With food prices up by 14.6% on last year – your money will not get you less in the supermarket.
It will mean that households will need to batten down the hatches when it comes to personal spending on food, but also energy, household bills and fuel.
This slashes the amount of disposable income people have left to spend on “life’s little luxuries”, according to Alice Haine, personal finance analyst at Bestinvest.
Alice said: “High inflation is the enemy of household finances, as it slashes spending power and erodes savings, making it very hard for people to maintain their living standards.”
Worker’s wages are also stagnating, as they fail to keep pace with soaring inflation.
Alice said: “Workers’ incomes are already failing to keep up with rising living costs with real wages falling 2.9% in the three months to August damaging disposable incomes in the process.
“With inflation expected to go up again, salaries simply won’t stretch as far in the months ahead.”
Late last month the BoE’s Monetary Policy Committee raised interest rates by 0.5 percentage points to 2.25 per cent – in a bit to try and tackle soaring inflation.
But many investors now think that the central bank will raise the base rate to 3%, or possibly 3.25% next month.
The BoE is due to announce its next decision on interest rates on November 3.
And while it’s good news if you have lots of savings put away, but it means higher monthly mortgage repayments for first-time buyers and homeowners.
