Nov 13 2012
Consumers are feeling a fresh squeeze on living costs after figures revealed a shock jump in the UK's annual inflation rate to 2.7%.
The bigger-than-expected leap in the Consumer Prices Index (CPI) was described by one City economist as a "nasty surprise" and came just a month after inflation fell back to a near three-year low of 2.2% in September.
A near trebling in university tuition fees and a hike in food prices were blamed for the increase, which was the biggest month-on-month jump in a year.
The figures from the Office for National Statistics (ONS) put pressure on the Bank of England, which is due to publish its latest growth and inflation forecasts on Wednesday. It had previously predicted CPI would fall back to the Government's 2% target by the end of the year.
The ONS said the biggest factor pushing up CPI was the Government's widely protested move to lift the tuition fees cap to £9,000 from £3,375 a year ago, which saw education costs rise by 19.1% last month - the largest increase since records began.
Sharp increases in the cost of food were also behind the rise after this summer's record wet weather left the UK with its worst potato and carrot harvest in living memory, said the ONS. With a raft of energy bill hikes still to take effect, some experts are now predicting inflation will rise to 3% by January and could hit 3.5% by the middle of 2013.
Confirmation that inflation is back on the rise will come as a blow to pensioners and savers, who have seen their income hit hard by rock bottom interest rates.
Food and utility bill rises in particular are likely to hit retired Britons, according to Tom McPhail, head of pensions research at Hargreaves Lansdown.
He said a high spend on food and energy meant inflation for pensioners was effectively 0.4% higher than the actual Retail Prices Index (RPI) figure - adding up to £13,757 for a typical household during a 20-year retirement.
RPI, which includes housing costs, rose to 3.2% in October from 2.6% in September due also to increases in mortgage rates. The RPI rise between September and October was the largest monthly increase for two and a half years.