According to official statistics, prices rose slightly in September while the economy continued its reopening.

Consumer Prices Index measured the rise in cost of living to be 3.1% for the year ending September. This is down from 3.2% for August.

The biggest driver of price increases was the increase in transport prices.

This comes just days after the Bank of England said it would “have to act” about rising inflation. It suggests that interest rates could rise very soon.

Due to the lower prices of hospitality, inflation fell slightly last month.

According to the Office for National Statistics, prices in cafes and restaurants rose this summer less than they did last year, which was when the Eat Out to Help Out Scheme ran.

Under the scheme, diners got a state-backed 50% discount on meals up to £10 each on Mondays, Tuesdays and Wednesdays.

Mike Hardie is the ONS’ head of price analysis. He stated: “However this was partly offset by most categories, such as furniture, household goods, and food prices falling slower than last year.

The cost of goods manufactured by factories increased again with machinery and metals showing significant price increases. The cost of road freight for UK companies also increased throughout the summer.”

Simply put, inflation is the rate at which prices are rising – if the cost of a £1 jar of jam rises by 5p, then jam inflation is 5%.

This applies even to services, such as getting your nails done and your car repainted.

While you may not be able to notice a drop in inflation month-to-month, over the long-term, price increases can make a significant impact on what you are able to buy.

Learn more about inflation.

Although prices rose slightly in September, 3.1% was still a significant increase over the Bank of England target of 2.2%.

Transport costs were the largest contributor to last month’s price rises.

In September 2020, average petrol prices were at 113.3 pence per gallon, while they stood at 134.9 pennies per litre. Travel restrictions reduced travel costs.

According to the ONS, the fuel price in September 2021 was the highest since September 2013.

Transport costs rose due to an increase in the used car price, 2.9% more in September than August.

The price of energy has also been influenced by factors like the rising demand for oil around the globe.

However, some essential goods such as computer chips are not available due to shortages, and this is causing businesses to incur higher costs.

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Suren Thiru (head of economics, British Chambers of Commerce) stated that additional price hikes were to be expected over the next few months due to the “increase in the energy price caps, partial reverse of the VAT reductions in hospitality and tourism, and persistent supply chain disruption”.

He said that the UK could be hit by rising inflation, which would reduce people’s purchasing power and decrease companies’ profits margins.

Rising costs affect everyone, however, if your income is low or you don’t have any savings, it’s more likely that you will feel them.

If your salary isn’t increasing in tandem with rising prices, it may be that your “real value” of your wage drops – what you make buys less.

Ruth Holroyd, BBC Breakfast said “We are just beginning to notice the pinch slightly.” She is usually responsible for doing the family’s weekly grocery shopping.

“I have noticed that although the overall prices seem to be higher than they are for other items, prices remain constant for grapes and strawberries. However, punnets for these things, such as grapes, has shrunk so that you get less.”

She is most worried about the effects of rising energy prices. Her previous People’s Energy account was terminated in September. Rising gas prices caused the company to cease trading.

Ruth expects that the family’s energy bill will double from £120 to £250 per month.

Some inflation can be considered a positive. People might hesitate to buy non-essential goods if they were cheaper.

However, if the prices go up too fast it can be interpreted as an indication that there are economic problems.

Kwasi Kwarteng, Business Secretary to the Government, stated Wednesday on BBC Breakfast that rising prices were “a cause for some concern,” and that government wants inflation rates lower.

He said that the price rises could be partly due to increased demand after an economic reopening.

Inflation is a risk when there’s strong economic growth. But the crucial question here is how long does that inflation be going to continue? He said.

He stated that he spoke with the Bank of England governor recently, and that it was possible for price rises to be stopped.

Liz Martins, senior economist with HSBC said to BBC Today that the latest figures were out Wednesday. “We cannot stand by our inflation concerns just because the number was a bit lower then expected.”

“Since Sept, there’s been significant rises in oil prices, petrol prices, and world oil prices. The Bank of England has also noticed more people becoming concerned about inflation.

She cautioned that the economy wasn’t “out of the woods” yet.

Andrew Bailey, Bank of England Governor, warned Sunday that the Bank of England would have to “act” in response to rising inflation.

According to the Bank, UK inflation will rise above 4% and then fall back once the economy is rehabilitated from Covid.

In order to reduce inflation, the UK central bank may raise interest rates. This is done in response to rising prices. It means that people will spend less if borrowing costs increase, as happens when mortgages get more costly.

The Bank of England’s 2 % inflation target is being met by investors. Investors expect interest rates will be increased later this year, or even in the early part of 2022.

He didn’t give any indication of when Bank rates could be raised from current records lows of 0.1%.

Governor said rising energy prices could make inflation more severe than initially thought.

This September’s slight decrease in inflation is more of a temporary relief from the rising cost of living and less of a signal that it’s finished.

Last month’s data compared August to the previous year, when prices for restaurants and hotels were artificially high due to government’s Eat out to Help Out program. The figures for this month compare the prices to where they are now and September 2020.

However, the average increase in cost of living was 3.1%, which masks sharp increases in prices for items like air tickets, up 9.7% or carpets up 9.6%.

Inflationary pressures are increasing, as manufacturers pay an additional 11.4% for raw materials. The prices paid at the factory gate have risen 6.7%. It is the highest increase in 10 years.

It is more likely that interest rates will rise before the end of this year and continue to rise in 2019.

Source: BBC.com

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