UK inflation has hit its highest level for more than a decade as supply chain disruption and record fuel prices sent the cost of living soaring, according to official figures.
Consumer Prices Index (CPI) inflation rose from 4.2 per cent in October to 5.1 per cent in November – the highest since September 2011, the Office for National Statistics (ONS) said.
Prices were expected to rise but the figure is substantially higher than the forecasted 4.7 per cent.
The equity benchmark FTSE 100 index slipped 0.1 per cent to 7,208.75 points after the news that broad-based price gains swept the economy. It is the first time that the CPI has breached 5 per cent for more than a decade as inflation hits more than double the Bank of England's 2 per cent target.
The data puts further pressure on the bank ahead of its interest rate meeting on Thursday, with policymakers having to weigh up the need to rein in rampant inflation but also to support growth as the threat of Omicron grows.
The bank, however, is expected to hold its record-low interest rate owing to turmoil over Omicron. Central banks normally use interest rate hikes to try to damp high inflation, which is weighing on companies and consumers globally.
"This [data] gives the bank enough ammunition to raise interest rates tomorrow, but we still think it is more likely to keep its powder dry until it knows more about the Omicron situation," said Capital Economics analyst Paul Dales.
Chancellor Rishi Sunak said: “We know how challenging rising inflation can be for families and households, which is why we're spending £4.2 billion ($5.57 billion) to support living standards and provide targeted measures for the most vulnerable over the winter months.
“With a resurgence of the virus, the most important thing we can do to safeguard the economic recovery is for everyone to get boosted now.”
Data showed that the Retail Prices Index (RPI) measure of inflation soared to its highest level for more than 30 years – hitting 7.1 per cent last month, up from 6 per cent in October.
The ONS reported surging prices across a range of goods and services, including fuel, energy, cars, clothing and food.
Figures showed petrol prices jumped to the highest yet recorded – 145.8p ($1.93) a litre last month, up from 112.6p a year before – while the cost of used cars also raced higher owing to shortages of new motors as supply chain issues continue to affect the economy.
Gas prices jumped 28 per cent and electricity bills were up 19 per cent.
Supply chain problems played a role in pushing up food prices, with inflation for food and drink running at 2.5 per cent last month – the highest for more than three years.
After countries emerged from pandemic lockdowns earlier this year, companies struggled to meet demand for goods, energy and services, sending inflation soaring.
“A wide range of price rises contributed to another steep rise in inflation, which now stands at its highest rate for over a decade,” said ONS chief economist Grant Fitzner.
“The price of fuel increased notably, pushing average petrol prices higher than we have seen before.
“Clothing costs – which increased after falling this time last year – along with price rises for food, second-hand cars and increased tobacco duty all helped drive up inflation this month.”
Economist Samuel Tombs, at Pantheon Macroeconomics, said inflation is now “uncomfortably high” for the bank, but believes rate setters will hold fire this week.
“The quick ascent of CPI inflation over the last four months probably will not panic the MPC into raising interest rates this week, given that the full extent of the economic damage wrought by Omicron is still unknown,” he said.
Hargreaves Lansdown analyst Susannah Streeter said: "Faced with such a high inflation reading, and with forecasts that the only way is up, the Bank of England would ordinarily be expected to call time on the cheap money party and raise interest rates.
"But with the recovery far from being in full swing and the Omicron variant an unruly guest, set to knock back confidence further for many sectors, policymakers may be hot and bothered but are likely to stay in wait-and-see mode tomorrow."
Labour said the government was not doing enough to tackle rapidly rising inflation. The opposition's chief secretary to the treasury, Pat McFadden, said the “figures are a stark illustration of the cost of living crisis facing families this Christmas".
