Britain’s pensioners will receive a three per cent increase next year after the annual inflation rate increased to three per cent.
Inflation was driven up by increases in transport and food prices, as it hit its highest rate in five years. The Consumer Prices Index (CPI) reached three per cent, a level it hadn’t reached since April 2012, and up from 2.9 per cent in August.
Due to the rise, state pension payments from April 2018 will rise to match up with September’s CPI. Currently, the full new state pension is £159.55 per week, equivalent to £8,296.60 per year.
ONS head of inflation Mike Prestwood spoke about the rise: “Food prices and a range of transport costs helped to push up inflation in September. These effects were partly offset by clothing prices that rose less strongly than this time last year.”
The Office for National Statistics said the cost of fuel and raw materials for industry was up by 8.4 per cent.
ONS explained that more expensive food and a small decrease in the cost of flying were the main factors behind the rate rise. Overall, the price of clothing had risen less strongly than this time last year.
Paul Hollingsworth, a UK analyst at Capital Economics, said a further increase in inflation to 3.2 per cent was likely to happen next month.
Mark Carney, the governor of the Bank of England, would then have to write a letter to the chancellor, Philip Hammond explaining why inflation was not being kept to its two per cent target.
“However, we don’t anticipate he will be writing letters for long. Indeed, we think inflation will be back below three per cent by the end of this year. And while it looks set to remain above the monetary policy committee target throughout next year, we think it will end 2018 at around 2.25 per cent.”