“Inflation is tightening its grip on the UK economy as rising fuel prices pushed it uncomfortably above the Bank of England’s 2% target, deepening the financial squeeze on households and businesses.
“The rise in services and core inflation may heighten Bank of England fears that the Iran-induced energy spike is fuelling broader price pressures, though subdued wage growth should help curb any second-round effects.
“Inflation’s upward march is set to continue as September’s uptick is likely to have been followed by another jump in October, with higher energy prices lifting inflation towards 3.8%, before fresh energy bill rises in January drive it close to 4.5%.
“Rising inflation is turning the Budget into a perilous high-wire act for the Chancellor, increasing pressure for cost-of-living support while pushing up government borrowing costs, which is shrinking fiscal headroom and narrowing his policy options.
“With inflation increasing, the pieces are falling firmly into place for a November rate rise. Policymakers will also be looking to the Chancellor to avoid adding fuel to the inflation fire by delivering a credible, fiscally disciplined Budget.”
ENDS
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