UK October 2024 Inflation Jumps to 2.3% pa

The Office for National Statistics (ONS) has this morning released inflation figures for the UK for October 2024.

October 2024 Consumer Prices Index (CPI) climbed a substantial 0.6% to 2.3% pa from 1.7% pa (September).  That said, CPI is only back to levels just above what we saw in August and July’s at 2.2% pa.

Upward pressure came from Owner Occupiers Housing (OOH) costs which increased by a massive 7.4% pa, still stubbornly high up from 7.2% pa last month.  Alcohol, tobacco, health, communications, and restaurants/hotels were also big contributors. 

Downward pressure came from transport, recreation, and furniture costs.  So, there is some respite, but the overall trend was upwards.

RPI Up by 0.7%

The old measure of inflation RPI, an arithmetical mean of the average prices of a basket of household spending (rather than the geometric mean for CPI) and still our preferred measure of real inflation, climbed an even bigger 0.7% to 3.4% pa in October.  This merely took back the 0.8% fall in September’s RPI, but we are still below August’s figure of 3.5% pa.  RPI remains stubborn and this increase bucks the trend of consistent falls over the last year.

Comment

Last month we were bullish about a Bank of England interest rate cut in both November and December 2024.  We got November’s 0.25% cut to 4.75% but we cannot see a rate cut on 19 December with most commentators and even mortgage lenders expecting a rate increase.  This is evidenced by there being n fixed rate mortgage deals below 4% pa now and many deals now back above 5% pa.

It could be yet another painful few months with an interest rate increase before inflation and rates fall back in Q1 and Q2 of 2025.  On a happier note, £Sterling will no doubt rise today meaning the cost of imports including food will fall slightly.

Key dates for us all: 

• Next ONS inflation report 18 December 2024.
• Next Bank of England MPC interest rate decision 19 December 2024.

A Happy Christmas?   We think not for prices and interest rates.