The consumer price inflation hit 11% in October 2022. The CPI increased 2% on a monthly basis in October, reflecting the CPI's annual inflation rate between July 2020 and 2021. The Office for National Statistics found that despite the implementation of the government's Energy Price Guarantee program, electricity, gas, and other fuels contributed most to price increases. In the year ending in October 2022, the cost of housing and household services, which includes energy bills, increased by an all-time high of 11.7%, up from 9.3% in September 2022.
Housing and household services had the biggest contribution to the yearly rate in October 2022 for both the CPIH and the CPI. Households are paying, on average, 88.9% more for electricity, gas, and other fuels in October 2022 than they were in October 2021. The highest increase in gas prices was in the domestic market, with prices in October 2022 more than double those of the previous year. In the 12 months leading up to October 2022, the cost of liquid fuels and electricity has increased by 70.0% and 65.7%, respectively. Despite the evident slowdown in the UK economy in recent months, which has been marked by a decline in consumer confidence and a wave of profit downgrades from domestic companies that serve consumers, the increase in CPI added pressure on the Bank of England to hike interest rates more quickly.
The most important indicator of interest rates in the UK is the bank rate, also referred to as the "Bank of England base rate" or "the interest rate." The Bank of England (BoE) has stated that it will take decisive action to reduce the record-high inflation rate. Increases in the bank rate have an effect on consumer spending patterns and can affect inflation and pricing changes. Higher costs of items arriving from overseas and as covid limits have been loosened and consumer spending has increased, prices are rising significantly worldwide.
In an attempt to stop soaring inflation, the Bank of England (BoE) raised its benchmark interest rate once more by 75 basis points (bps) in its November meeting, the highest increase in 33 years, to raise the Bank Rate to 3%. Bank of England increased interest rate eighth consecutive time this year, raising the interest rate from 0.25% in December 2021 and 0.50% in January to 2.25%. It represents a significant turning point for Britain's central bank, which is aiming to increase borrowing costs to reduce inflation. The central bank added that additional rises in the bank rate might be necessary for a sustained return of inflation to the target level, but to a peak that seems to be lower compared to what the financial markets currently priced.
The estimated unemployment rate in the UK was 3.6% in September. In the three months from July to September, the number of persons with jobs decreased by 52,000, according to the Office for National Statistics. Britain's unemployment rate unexpectedly increased in the three months leading up to September, and job openings decreased for a fifth straight report as employers concerned about the future of the economy.
The number of job openings between August and October decreased to 1.23 million, the lowest figure since late 2021 but still high by historical norms, highlighting the difficulties faced by many firms trying to fill their open positions. The Bank of England is concerned that as the labor market in Britain contracts, inflation pressures will increase and force it to hike interest rates even as the economy is expected to enter a recession.
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