UK inflation up again to hit five year high

The UK’s key inflation rate hit its highest for more than five years last month, driven up by increases in transport and food prices.

The Consumer Prices Index (CPI) for September climbed to 3 per cent, a level it last reached in April 2012, and up from 2.9 per cent in August.

The pick-up in inflation raises the likelihood of an increase in interest rates next month.

The latest UK inflation figures show that CPI has increased from 2.9 per cent in to 3.0 per cent in September 2017.

As with the August rise, the figures show continued pressure on households.

Food and non-alcoholic beverages have seen rises to the highest rate since October 2013.

Furthermore, discretionary spending is likely to be hit by the significant rise in the recreation and culture segment, which has hit its highest level in seven years.

Liz Cameron, CEO of the Scottish Chambers of Commerce, said: “The figures today continue to highlight the divergence between cost of living and real wages which characterises the fragility of the UK economy. Speculation continues to increase around the prospect of an interest rates rise in November, yet the inflation figures emphasise the uncertainty this would cause to both Scottish business and the UK economy as a whole.

“In the current climate, while real wages are falling, the MPC should continue to hold steady on interest rates.

“It is critical that the measures provided in the Chancellor’s upcoming Autumn Budget are clearly designed to boost business confidence and increase investment. Ensuring a stable environment for business growth will contribute to rising wages, and a subsequent rise in consumer confidence.”

As well as marking the highest reading since April 2012, the rise in inflation is also significant because state pension payments from April 2018 will rise in line with September’s CPI.

Under the “triple lock” guarantee, the basic state pension rises by a rate equal to September’s CPI rate, earnings growth or 2.5 per cent, whichever is the greatest.

At the moment, the full new state pension is £159.55 per week, equivalent to £8,296.60 per year.