The Brief: UK inflation rose by 0.5% in September to 10.1%, bringing the Consumer Prices Index (CPI) back to a 40-year high after it first set the record in July. The Office for National Statistics (ONS) reported that the largest upward contributions to the annual Consumer Prices Index with Housing (CPIH) inflation rate came from housing and household services, food and non-alcoholic beverages, and transport (motor fuels).
Why It Matters: Data from the ONS reveals that aside from food, the monthly change in the CPIH was mostly driven by the hike in liquid fuels (+102.2%), gas (+95.7%), and electricity (+54.0%). Some relief can be expected in the next CPI reporting that will reflect the impact of the energy price freeze that started in October. However, this will only be applicable at the end of this winter instead of the initial plan of two years.
Finanze® Foresights: Higher inflation hurts lenders because they get paid back with less than the real value of what they were owed by mortgage holders. Likewise, those who will be taking out a mortgage during this time or will have to refinance their expiring deals are going to be hit hard and will be forced to reassess their budgets to prioritise debt repayment. Real wages dropped 3.0% in the second quarter because of inflation and will likely to continue its dive this quarter.
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