UK inflation jumps to 10-year high of 5.1% in November

The annual rate of inflation across the UK – as measured by the consumer prices index – surged to a 10-year high of 5.1% in November from the October figure of 4.2%. The fastest annual rise in the cost of living since September 2011 was driven largely by the soaring prices of fuel and second-hand cars, energy, and clothing and footwear, according to the Office for National Statistics.

‘British households already know the average cost of living is rising sharply: they are seeing it in their rising bills and overall monthly spend,’ said personal finance expert Adrian Lowery of investing platform Bestinvest.

‘But inflation isn’t the same for everyone and families who are more reliant on their cars and who spend a higher proportion of their income on household bills will feel the crunch more keenly.

‘This inflation reading – higher than expectations and more than twice the Bank of England’s target - will reignite the debate over whether interest rates need to go up, not least on the Bank’s monetary policy committee, which makes its next decision tomorrow.

‘The unexpectedly rapid spread of the Omicron variant, and fears of an economic relapse, have made an imminent hike less likely – but this surge in price pressures could bring out a couple of the inflation hawks on the MPC to vote for a small rate rise.

‘Either way real interest rates for savers will remain resoundingly negative for the foreseeable future. Investors are also seeing their returns eroded at the moment but equities and other investments provide the only reasonable expectation of maintaining the real value of one’s savings.

‘US inflation came in at an eye-watering 6.8% in November (the highest since June 1982) and if central banks around the world start to tighten monetary policy suddenly in response to overheating prices, with economies not clearly out of the woods, the markets could hit some turbulence.

‘But long-term investors with diversified portfolios should not be overly concerned with short-term stock market volatility. New investors who have properly assessed the risks can buy into the market at regular intervals to lessen the effects of market turbulence.’