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UK inflation forecast to rise in October, impacted by spending, energy prices, and more

UK inflation rose in October, as indicated by data the Office for National Statistics is set to publish on Wednesday. Up until now, the consensus view in the UK has been deflationary, but it can't ignore factors that will affect inflation even after the first budget by Labour: increasing government spending, borrowing, and taxes.

Experts expect the Consumer Price Index to have risen to 2.2% in October from 1.7% in September, taking it back above the target of the Bank of England at 2%. And that might just be enough to make this a turning point coming into one of the last readings of the year.

On the other hand, the core inflation remains at 3.1 percent, excluding volatile items such as energy, food, and alcohol. This comes marginally low from 3.2 percent for September. Thus, there still seems to be a gradual deceleration of core inflation even when headline inflation is moving up.

UK Facing Soaring Bills as Energy Costs And Inflation Surge

Several reasons explain the trend. First of all, there is the Ofgem price cap on domestic energy prices suspended from October 1 by the regulator. It is probably going to increase gas and electricity bills again.

The global front is being mounted by a stronger US dollar and increasing oil prices, thus mounting inflation pressure. Even though oil prices fell by 10%, the natural gas prices went up by almost 30%, which could further strain the UK's inflation picture.

UK Inflation to Rise in 2025 After Budget and Rate Cut

It would be the first inflation reading since the budget on 30 October and the Bank of England meeting on November 7 when interest rates were lowered from 5 percent to 4.75 percent. This measure, as a result of the budget, is expected to raise CPI and GDP by 0.5 percentage points and 0.75 percentage points, respectively.

Inflation should increase again in 2025 given that the comparisons with the 2023 figures are getting increasingly tough. UK inflation has plummeted from the pandemic- high it hit in 2022 of more than 11%, though it is a long way to go before the inflation fight is won, given the Bank of England squeezes out what is left of the inflationary forces.