Inflation expected to leap again in October after hitting 40-year high

·Breaking News Editor, Yahoo News UK
·3 min read
(PA/Getty)
Inflation is continuing to hit 40-year high levels - and it's only to get worse. (PA/Getty)

Experts have predicted that inflation will rise again by October, on the day levels rose to their highest seen since 1982.

The rate of consumer prices index (CPI) inflation rose from 9% in April to 9.1% in May, the Office for National Statistics said on Wednesday, as the cost of living crisis continues.

The increase matches what analysts had expected and pushes the measure to its highest since early 1982, according to ONS estimates.

But forecasts released this week predict that the Government cap on energy bills could rise again from an already record high £1,971 to £2,980 in the autumn.

The Bank of England has predicted that inflation will spike at more than 11% in October after the price cap is changed again.

Read more: UK inflation rate hits fresh 40-year high of 9.1%

(PA)
(PA)

Dan Hanson from Bloomberg Economics said the peak wouldn't come until October, meaning households are facing months of financial constraints amid a backdrop of rising food, energy and fuel costs.

“The Bank of England opened the door to moving in bigger steps than 25 basis points by saying signs of more persistent inflationary pressure would be met by ‘forceful action.’," Hanson said,

"Today’s release will do nothing to allay those fears. We expect inflation to pick up in the months ahead as rising food and fuel prices lift the annual rate.

Read more: Average UK food shop rises by £380 a year

"The peak isn’t likely to arrive until October, when Ofgem, the UK’s energy regulator, raises the price cap on energy bills again.”

Rising inflation this year has put further pressure not just on Britons' bank accounts, but also the railways, as this week sees the largest strike in 30 years as unions demand pay rises.

Watch: Raab warns of a 'vicious cycle' of rising inflation if RMT demands are met

Deputy prime minister Dominic Raab said rising inflation figures show the need for pay restraint in the public sector and on the railways.

He told Sky News there is a risk of a “vicious cycle” of rising wages pushing inflation even higher if union demands are met, adding that the Government is taking a “firm line”.

The price of energy is not just feeding through to household energy bills.

Gas, oil and other fossil fuels are needed to make and transport many of the goods that households buy every month.

When the price of the fuel goes up, so does the price of the end product.

Energy prices have spiked over the last year. To begin with they started rising as the global economy started to reopen and demand for energy rose after the pandemic.

The prices later worsened, especially in Europe, when Russia launched a full-scale invasion of Ukraine in February.

Read more: FTSE presses ahead amid biggest UK rail strike in 30 years

(PA)
(PA)

Russia is one of the world’s largest energy producers.

A breakdown from the ONS shows that the biggest increases in the 12 months to May were for fossil fuel products, including diesel, electricity, petrol and natural gas. These were, however, little changed from April.

Some of the biggest changes from April were food items. Ukraine is one of the biggest grain producers in the world and experts worried about what the war could do to global prices and availability.

The price of flour and other cereals in the UK had been decreasing before the war started, but has been ticking up since.

Between February and April price rises increased from 2.3% to 9.3%. But in May prices leaped and are now 16.3% higher than a year ago.