Inflation set for two-year high as slump in pound bites
Inflation is expected to hit a two-year high when official figures for October are published today. The Consumer Price Index (CPI) measure of inflation is forecast to have reached 1.1% in October, up from 1% in September and 0.6% in August.
Economists are predicting that a jump in petrol and diesel prices will push up the cost of living, as stronger oil prices make filling up at the pump pricier.
Sterling's near 20% slump against the US dollar and 15% fall against the euro since the EU referendum result is also expected to start feeding through to prices, with services firms and manufacturers passing on higher import costs.
The latest manufacturing PMI report for October said the pound's collapse had triggered the steepest rise in purchasing costs in the survey's 25-year history.
Howard Archer, chief UK and European economist at IHS Global Insight, is predicting CPI to hit 1.2% for October and "trend markedly higher over the coming months'' as the impact of sterling's weakness is felt. He is forecasting inflation to reach its 2% target in the first quarter of next year, before rising to 3% in the latter part of 2017 and peaking at around 3.5% in early 2018.