UK Treasury chief vows to give families ‘some breathing space’ as inflation runs hot, highest in a year

The U.K. witnessed its highest annual inflation rate in nearly a year, driven by the ongoing Iran war and its impact on fuel prices, according to official data released on Wednesday. The Office for National Statistics reported a 3.5% year-on-year increase in consumer prices for the period ending September, up from 3.1% in August.

This marks the highest inflation rate since October of the previous year and surpasses the 3.4% forecast by most economists for the month. Motor fuels, particularly those affected by the Iran war and the subsequent bottlenecks in the Strait of Hormuz, accounted for the largest share of the price surge. Treasury chief John Healey pledged to provide families and businesses "some breathing space" from the rising cost of living in his upcoming budget statement.

Economists anticipate the Bank of England to raise interest rates during its November meeting, with an expected increase to 4% from the current 3.75%. Suren Thiru, chief economist at ICAEW, noted that the inflation data solidifies the case for a November rate hike. The Bank of England, European Central Bank, and U.S. Federal Reserve have all increased interest rates recently in response to the escalating inflation.