Bank of England governor Mark Carney warned Britons not to be fooled by last month’s drop in inflation as he said sharp rises in the cost of living are coming.
In a hearing with MPs on the Treasury Select Committee, Mr Carney cautioned that “inflation is going up” as the plunging pound will put pressure on retailers and manufacturers to raise their prices.
He said the official figures for October were down to very volatile clothing and footwear prices, which had been impacted as retailers were knocked by unseasonally warm weather.
The Office for National Statistics (ONS) said the Consumer Price Index (CPI) measure of inflation was 0.9% in October, down from 1% in September, with economists’ expecting a higher figure of 1.1%.
The ONS said there was “no clear evidence” that the plunge in the value of the pound since the EU referendum result was bumping up shop prices.
However, there were signs that the currency fall was ramping up costs for manufacturers, with the Producer Prices Index (PPI) showing total input prices rising 12.2% in October, compared to a 7.3% rise in September.
The pound’s weakness also helped push up output prices to 2.1% last month from 1.3% in September, the ONS said.
It comes as the latest PMI report for the manufacturing industry showed sterling’s near 20% slump against the US dollar and 15% fall against the euro since the Brexit vote had triggered the steepest rise in purchasing costs in the survey’s 25-year history.
Mike Prestwood, ONS head of inflation, said: “After initially pushing up the prices of raw materials, the recent fall in the value of the pound is now starting to boost the price of goods leaving factories as well.