Inflation 'rose to 3.4% in September' after surge in petrol and diesel pump prices

Inflation 'rose to 3.4% in September' after surge in petrol and diesel pump prices Figures from the Office for National Statistics are expected to show fuel prices pushed inflation to around 3.4% in September Soaring pump prices drove inflation to around 3.4% last month, figures out later this week are expected to show. The jump in the cost of petrol and especially diesel has fed through to higher living costs, economists predict the Office for National Statistics to confirm on Wednesday. Other everyday outgoings are also rising, with energy regulator Ofgem’s price cap going up by 4% at the start of October - with a 16% spike forecast in January - and rents and other housing costs also up. The tick-up in inflation also makes a Bank of England rate hike a near certainty, say economists, pushing up mortgage costs for borrowers taking out new home loans. The widespread increases add to calls on Chancellor John Healey to come good on his promise to provide “breathing space” to households in next week’s Budget. Measures are expected to include scrapping a planned increase on fuel duty and targeted help with energy bills. Consultants Pantheon Macroeconomics believes about half of last month’s jump in the consumer prices index measure of inflation - from 3.1% to 3.4% - will come from the pump price shock. Fuel prices have surged in the back of the ongoing US-Iran war, and attacks on refineries. And while prices have eased slightly in the past week, the nationwide average for petrol remains at 174.31p a litre, with diesel at 199.31p, according to motoring group the RAC. September also saw the end of the government’s Great British Summer Savings scheme, which saw VAT temporarily cut from 20% to 5% to save families money on days out. Pantheon said: “We are confident that inflation will surge, though uncertainty is unusually high given a lot of moving parts.” It also believes that higher inflation and stronger-than-expected growth data for the UK economy the outcome of the Bank of England rate vote early next month a straightforward: “a hike”. The Bank’s monetary policy committee (MPC) - tasked with getting inflation to 2% - is predicted to up its base rate from 3.75% to 4%. The nine members of the MPC will also keep in mind how much workers’ pay is rising. Pantheon believes Mr Healey will announce a hike in the National Living Wage by 4.25% - or more - from next April, above the Low Pay Commission’s initial 3.7% guidance. The move would benefit more than two million workers. The rising cost of living is beginning to impact how workers and households in general feel, separate research has revealed. New figures from S&P Global show consumer confidence has fallen for the third month running, and now stands at a three year low. Maryam Baluch, economist at S&P Global Market Intelligence, said: “Any ‘Burnham bounce’ has proved short-lived, eclipsed by the impact on the cost of living from events in the Middle East and the accompanying prospect of higher interest rates. “October has brought a growing conviction among households that borrowing costs will rise imminently as the Bank of England seeks to tame inflation. As a result, Chancellor John Healey faces the challenge of setting a Budget that will not ruffle bond market feathers while seeking to keep alive the promise that the government is serious about delivering stronger economic growth. “With consumer spending typically a key driver of the UK economy, clearly households will need to start feeling brighter about their financial prospects and job security than we’re seeing in the lead up to the Budget if hopes of stronger growth, let alone ‘growth in every postcode’, are to become anything more than wishful thinking.” The UK's 3.1% rate of inflation is lower than the average 3.8% across the eurozone, including 3.3% in Germany and 4.2% in Italy. It is also blow the 3.7% mark in the US. However, it is higher than in some other major economies, including Canada's 3% and Japan's 1.9%.