MIDF Amanah Investment Bank Bhd (MIDF Research) highlighted a sharper-than-expected rise in the United Kingdom's inflation rate, which reached 2.3% in October, exceeding the Bank of England's (BoE) target of 2%. This marks a significant increase from September's 1.7% and the highest level in six months, driven by rising housing and household service costs.

The surge was attributed to an increase in regulated domestic energy tariffs following Ofgem's energy price cap adjustment. Monthly electricity and gas prices climbed 7.7% and 11.7%, respectively, contributing to slower deflation in annual electricity prices (-6.3% compared to -19.5% in September) and gas prices (-7.3% compared to -22.8%).

Services inflation—a key metric for the BoE—rose to 5.0% year-on-year, supported by higher travel and transport costs, including a rebound in airfares (+6.6% compared to -5.0% in September). Other contributors included increases in the prices of restaurants and hotels (+4.3%), health (+5.6%), education (+5.0%), and communication (+4.7%).

Meanwhile, goods deflation moderated to -0.3%, down from -1.4% in September. On a monthly basis, consumer prices increased by 0.6%, while annualised inflation excluding housing costs stood at 3.3%, slightly up from September's 3.2%.

Given this data, MIDF Research anticipates the BoE will adopt a cautious stance at its December meeting. The central bank is expected to keep interest rates unchanged at 4.75%, balancing efforts to curb inflationary pressures with the need to sustain broader economic stability.