Inflation bounces back up after rise in energy price cap

The rate of inflation has bounced back up to 2.3% in October, reducing the chances of a third interest rate cut before the end of the year.

The consumer prices index (CPI) rate had dropped to 1.7% in September, but economists had expected it to return to the level seen in July and August, of 2.2%.

The official data from the Office for National Statistics came in slightly higher, and taking it back above the Bank of England’s 2% target.

Grant Fitzner, chief economist at the Office for National Statistics, said: “Inflation rose this month as the increase in the energy price cap meant higher costs for gas and electricity compared with a fall at the same time last year.

“These were partially offset by falls in recreation and culture, including live music and theatre ticket prices.

“The cost of raw materials for business continued to fall, once again driven by lower crude oil prices.”

The cost of raw materials fell 2.3% in the year to October, down from a revised decrease of 1.9% in the year to September.

Meanwhile, factory gate prices fell 0.8% in the year to October, down from a revised decrease of 0.6% in the year to September.

The news will come as a blow for those hoping for another interest rate cut on December 19.