Soaring Energy Prices Drive UK Inflation To 10-Year High

Well ahead of the Bank of England target of 2.0 percent inflation

High energy prices drove inflation in the UK to a 10-year high of 4.2 percent in October, and energy is expected to fuel additional price hikes next year when the energy regulator is set to raise the so-called price cap. The UK has a so-called Energy Price Cap in place, which protects households from too high bills by capping the price that providers can pass on to them, but which additionally burdens energy providers.

The Consumer Prices Index (CPI) in the UK rose by 4.2 percent in the 12 months to October 2021, up from 3.1 percent in September, the Office for National Statistics said on Wednesday. The October inflation rate was well ahead of the Bank of England target of 2.0 percent inflation, which raises the odds of the central bank raising interest rates in December.

Last month, “the main upward pressure came from electricity, gas and other fuels, which contributed 0.59 percentage points to the CPIH 12-month inflation rate,” the Office for National Statistics said today.

https://oilprice.com/

The Consumer Price Index for April rose 4.2%

Stocks already lower

Red-hot consumer inflation data for April spooked markets and raised concerns that the Fed is wrong about rising prices being just temporary. If the Fed is incorrect, that means that it could begin to unwind its easy policies quicker than expected and ultimately raise interest rates.

The Consumer Price Index for April rose 4.2% from a year ago, the briskest pace since September 2008. Economists had expected a big number, of 3.6%, because of base effects accounting for last year’s weakness. But the CPI’s surge took markets by surprise, sending Treasury yields higher and stocks lower.

The CPI measures a basket of goods and energy and housing costs. Excluding food and energy, core CPI increased by 3% year over year and 0.9% on a monthly basis, compared with respective estimates of 2.3% and 0.3%. Stocks, already lower, buckled under the inflation worry when the Labor Department released its report at 8:30 a.m. ET Wednesday. Tech slumped and the losses on the Nasdaq accelerated. The index was down 2% in afternoon trading, while the S&P 500 was off 1.6%.

https://www.cnbc.com/