Inflation rose to 3.5% in September, higher than expectations, as the ongoing conflict in the Middle East pushed diesel prices above £2 a litre.
The latest data also shows wages growing by 3.9% and, under the terms of the triple lock, this should be used to determine the increase in many benefits and the state pension which should rise to £250.70 a week, up from the current £241.30 a week.
The figures will be a cautious reminder to Chancellor John Healey of the need to retain fiscal discipline in next week’s budget and will pressure the Bank of England to raise interest rates.
Annual inflation rose from 3.1% in August, according to the Office for National Statistics. Economists had forecast the September figure to show an increase an increase to 3.4%.
Petrol prices have leapt above £1.70, while the cost of a litre of diesel has continued to rise, hitting a record high of more than £2 a litre this month.
The Bank of England is expected to raise interest rates next month amid concerns that inflation will rise above 4% next year – more than double the bank’s 2% target rate.
Martin Sartorius, lead economist at the CBI, said: “Inflation ramped up in September, supported by a further rise in fuel pump prices. We expect that inflation will continue to accelerate in the months ahead due to higher energy costs and some firming in broader price pressures.
“September’s rise in inflation means that a rate hike will remain firmly on the table at the Monetary Policy Committee’s next meeting. While there have been limited signs of higher energy costs feeding into domestic price pressures so far, the Committee will likely want to guard against the risk of persistently higher headline inflation becoming embedded in future wage and price-setting behaviour.”
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