Britain’s inflation rate dipped to 3.1 per cent in the 12 months to September after the artificial blip caused by last year’s ‘Eat Out to Help Out,’ scheme dropped out of the figures, but higher prices are still to come.
The increase in consumer prices came in a notch lower than the 3.2 per cent seen in August, the Office for National Statistics said on Wednesday, but the reading was still well above the Bank of England’s 2 per cent target for a second month.
Financial markets are pricing in a BoE lift to interest rates next month to contain an upward spiral in prices, as central bank officials expect the headline inflation rate to jump above 4 per cent this year.
Eat Out to Help Out was a discount scheme devised last year by Rishi Sunak, Chancellor of the Exchequer, designed to attract diners back to hospitality venues to support the ailing sector after coronavirus lockdowns.
“Annual inflation fell back a little in September due to the unwinding effect of last year’s Eat Out to Help Out, which was a factor in pushing up the rate in August,” said ONS head of prices Mike Hardie.
“However, this was partially offset by most other categories, including price rises for furniture and household goods and food prices falling more slowly than this time last year.”
The cost of transport led gains in inflation in September, with a hefty jump in petrol prices even before the fuel crisis reduced supplies across the country.
Average petrol prices were at 134.9 pence ($1.85) per litre in September 2021, compared with 113.3 pence per litre a year earlier, as fuel provided an upward pressure on inflation, the ONS said.
Used car prices also rose sharply amid a global shortage of semiconductors, increasing 2.9 per cent on the month to September.
The cost of goods produced by factories also rose again with metals and machinery showing a notable price rise, while road freight costs for UK businesses continued the upward trajectory seen over the summer, Mr Hardie said.
These factors were offset by a sharp decline in prices at hotels and restaurants, which fell back in September when compared with a year ago.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said inflation could reach 5 per cent next April despite the slight dip this month, which could lead the BoE to increase interest rates imminently.
“With prices staying stubbornly high and another surge expected, a gentle rise in interest rates before the end of the year still looks likely if there is any chance of keeping a Goldilocks economy [where an economy is not too hot or too cold but just right, stealing a line from the popular children's story Goldilocks and the Three Bears] within reach,” Ms Streeter said.
“Too much inflation in the mix risks the economy getting too hot, leading prices to spiral upwards. If rates are pushed up rapidly, there’s a risk it gets too cold, freezing off economic growth. A 2 per cent inflation target is considered just right, as long as the economy also keeps growing.”
Chancellor of the Exchequer Rishi Sunak said the government is working with businesses and international partners to address the pressures of rising inflation as global shocks push up prices around the globe.
“We are supporting people with the cost of living, including through a new £500 million support fund to help vulnerable households, the energy price cap, and assistance with energy bills through the winter,” Mr Sunak said.
Britain’s recovery is already considered to be cooling rapidly amid supply chain issues, labour shortages and the soaring energy price.
Avoiding the bad dream of stagflation will still be the priority, Ms Streeter said, rather than the lofty aims of a Goldilocks economic utopia.
“If gas prices continue to spike and power rationing is introduced by energy intensive industries, economic growth could be knocked back into a downturn,” Ms Streeter said.
However, with the Monetary Policy Committee not entirely aligned on a rate rise, they may hold off from voting for an increase in November.
“A certain amount of nervousness ripples through the financial markets at the very thought of a rate hike, given that investors have become somewhat used to this era of ultra-low rates, so this edge downwards in CPI in September may provide some short-term relief,” Ms Streeter said.
“But even if the Bank of England does raise the base rate by a few notches in the months to come, it isn’t forecast that it will go much beyond 1 per cent next year.
“That is because central bank policymakers still believe inflation is transitory. Like porridge without enough milk, it’s sticking around for a lot longer than was previously thought, but is expected to ease off as pandemic supply chain issues finally lift."
Separately, house price growth returned to double digits in August, the ONS said, with average house prices up 10.6 per cent.
The average house price hit £264,000 in August, with homes costing £25,000 more than a year ago despite a temporary summer lull amid the tapering of the stamp duty holiday.
Meanwhile, eurozone inflation hit 3.4 per cent on the year in September, a 0.5 per cent increase on August as more expensive energy and services increased prices, the European Union's statistics office Eurostat said.
While the headline number was well above the European Central Bank's target of 2 per cent, the higher rate was caused mainly by the 17.6 per cent year-on-year surge in energy prices.
The ECB expects consumer prices to start easing next year.
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More on Quran memorisation:
Top tips
Create and maintain a strong bond between yourself and your child, through sensitivity, responsiveness, touch, talk and play. “The bond you have with your kids is the blueprint for the relationships they will have later on in life,” says Dr Sarah Rasmi, a psychologist.
Set a good example. Practise what you preach, so if you want to raise kind children, they need to see you being kind and hear you explaining to them what kindness is. So, “narrate your behaviour”.
Praise the positive rather than focusing on the negative. Catch them when they’re being good and acknowledge it.
Show empathy towards your child’s needs as well as your own. Take care of yourself so that you can be calm, loving and respectful, rather than angry and frustrated.
Be open to communication, goal-setting and problem-solving, says Dr Thoraiya Kanafani. “It is important to recognise that there is a fine line between positive parenting and becoming parents who overanalyse their children and provide more emotional context than what is in the child’s emotional development to understand.”
Scoreline
Ireland 16 (Tries: Stockdale Cons: Sexton Pens: Sexton 3)
New Zealand 9 (Pens: Barrett 2 Drop Goal: Barrett)
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UAE currency: the story behind the money in your pockets
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Uefa Champions League final:
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FIGHT CARD
Fights start from 6pm Friday, January 31
Catchweight 82kg
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Women’s bantamweight
Cornelia Holm (SWE) v Corinne Laframboise (CAN)
Welterweight
Omar Hussein (JOR) v Vitalii Stoian (UKR)
Welterweight
Josh Togo (LEB) v Ali Dyusenov (UZB)
Flyweight
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Catchweight 80kg
Seb Eubank (GBR) v Mohamed El Mokadem (EGY)
Lightweight
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Lightweight
Alan Omer (GER) v Reydon Romero (PHI)
Welterweight
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Featherweight
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What sanctions would be reimposed?
Under ‘snapback’, measures imposed on Iran by the UN Security Council in six resolutions would be restored, including:
- An arms embargo
- A ban on uranium enrichment and reprocessing
- A ban on launches and other activities with ballistic missiles capable of delivering nuclear weapons, as well as ballistic missile technology transfer and technical assistance
- A targeted global asset freeze and travel ban on Iranian individuals and entities
- Authorisation for countries to inspect Iran Air Cargo and Islamic Republic of Iran Shipping Lines cargoes for banned goods
UAE currency: the story behind the money in your pockets
How to help
Call the hotline on 0502955999 or send "thenational" to the following numbers:
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Our legal consultants
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Hili 2: Unesco World Heritage site
The site is part of the Hili archaeological park in Al Ain. Excavations there have proved the existence of the earliest known agricultural communities in modern-day UAE. Some date to the Bronze Age but Hili 2 is an Iron Age site. The Iron Age witnessed the development of the falaj, a network of channels that funnelled water from natural springs in the area. Wells allowed settlements to be established, but falaj meant they could grow and thrive. Unesco, the UN's cultural body, awarded Al Ain's sites - including Hili 2 - world heritage status in 2011. Now the most recent dig at the site has revealed even more about the skilled people that lived and worked there.
Fitness problems in men's tennis
Andy Murray - hip
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Challenge Cup result:
1. UAE 3 faults
2. Ireland 9 faults
3. Brazil 11 faults
4. Spain 15 faults
5. Great Britain 17 faults
6. New Zealand 20 faults
7. Italy 26 faults
Stage 2 results
1 Caleb Ewan (AUS) Lotto Soudal 04:18:18
2 Sam Bennett (IRL) Deceuninck-QuickStep 00:00:02
3 Arnaud Demare (FRA) Groupama-FDJ 00:00:04
4 Diego Ulissi (ITA) UAE Team Emirates
5 Rick Zabel (GER) Israel Start-Up Nation
General Classification
1 Caleb Ewan (AUS) Lotto Soudal 07:47:19
2 Sam Bennett (IRL) Deceuninck-QuickStep 00:00:12
3 Arnaud Demare (FRA) Groupama-FDJ 00:00:16
4 Nikolai Cherkasov (RUS) Gazprom-Rusvelo 00:00:17
5 Alexey Lutsensko (KAZ) Astana Pro Team 00:00:19
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Price, base Dh379,000
Engine 2.9-litre, twin-turbo V6
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The candidates
Dr Ayham Ammora, scientist and business executive
Ali Azeem, business leader
Tony Booth, professor of education
Lord Browne, former BP chief executive
Dr Mohamed El-Erian, economist
Professor Wyn Evans, astrophysicist
Dr Mark Mann, scientist
Gina MIller, anti-Brexit campaigner
Lord Smith, former Cabinet minister
Sandi Toksvig, broadcaster
