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UK inflation rate rises to 2.3% in October – what it means for your money
Plus click on the video to see how inflation impacts you
THE UK's rate of inflation has risen above the Bank of England's target.
The Office for National Statistics (ONS) said the Consumer Price Index (CPI) measured 2.3% in the 12 months to October.
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Today's reading is slightly higher than expected with the experts predicting the figure to rise to 2.2%.
It comes after inflation measured 1.7% in September, marking the first time it had fallen below the Bank of England's target in three years.
The Bank of England has a target of keeping inflation at 2%.
Inflation is a measure of how much the prices of everyday goods such as food and clothes, and services such as train tickets and haircuts, have increased compared to a year earlier.
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It's important to note that when inflation drops it doesn't mean that prices have stopped rising, it just means they are doing so at a slower pace.
An increase in household energy bills was blamed for the rise in inflation.
Millions of households saw their bill rise by £149 in October due to Ofgem raising its energy price cap.
Overall, the cost of bills and other monthly outgoings reached 5.5% in October up from 3.8% the previous month.
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Grant Fitzner, chief economist at the ONS, 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."
What is the energy price cap?
This added pressure comes as energy bills are also set to rise again in January.
The amount a typical households will pay is set to increase by 1% at the start of the year.
Darren Jones, Chief Secretary to The Treasury acknowledged there was “more to do” to ease cost-of-living pressure as inflation increased.
He said: “We know that families across Britain are still struggling with the cost of living.
“That is why the Budget last month focused on fixing the foundation of our economy so we can deliver change."
He added:"That includes boosting the national minimum wage, freezing fuel duty and protecting working people’s payslips from higher taxes.
“But we know there is more to do. That is why the Government is focused on economic growth and investment so we can make every part of the country better off.”
What it means for your money
Today's reading also means that policymakers might act more cautiously when it comes to cutting the base rate.
It follows a decision by the Monetary Policy Committee (MPC), the BoE's rate-setters to reduce the base rate from 5% to 4.75% earlier this month.
The base rate is used by lenders to determine the interest rates offered to customers on savings and borrowing costs including mortgages.
Alice Haine, personal finance expert at Bestinvest, by Evelyn Partners, said today's reading could spell further misery for house buyers.
She said: “Homeowners and first-time buyers are likely to be disheartened by the latest inflation reading, as it reduces the likelihood of a third rate cut this year.
"The average cost of a new fixed-rate mortgage has been creeping up since the Budget, as lenders price their products to reflect expectations that interest rates may stay higher for longer."
Alice explained that the higher-than-expected reading could also mean mortgage borrowers could have "more pain to contend with if more lenders adjust their rates upwards".
Meanwhile, Adam Thrower, head of savings at Shawbrook, said savers "should take action" to ensure they can get the most competitive rates.
Despite the latest base rate cut, some savings rates, particularly on longer-term accounts, have held firm—or even risen slightly.
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He said: "This is great news for anyone looking to secure competitive returns over a longer period. "
"With 1.4 million accounts maturing by the end of the year, now is the ideal time to review your options. "
Why does inflation matter?
INFLATION is a measure of the cost of living. It looks at how much the price of goods, such as food or televisions, and services, such as haircuts or train tickets, has changed over time.
Usually people measure inflation by comparing the cost of things today with how much they cost a year ago. The average increase in prices is known as the inflation rate.
The government sets an inflation target of 2%.
If inflation is too high or it moves around a lot, the Bank of England says it is hard for businesses to set the right prices and for people to plan their spending.
High inflation rates also means people are having to spend more, while savings are likely to be eroded as the cost of goods is more than the interest we're earning.
Low inflation, on the other hand, means lower prices and a greater likelihood of interest rates on savings beating the inflation rate.
But if inflation is too low some people may put off spending because they expect prices to fall. And if everybody reduced their spending then companies could fail and people might lose their jobs.
See our UK inflation guide and our Is low inflation good? guide for more information.
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