Inflation steady at 3.1% ahead of predicted surge in the cost of living

The rate of inflation crept down slightly to an annual rate of 3.1% in September, according to official figures which are tipped to surge ahead in the months ahead and force the Bank of England to intervene.

The Office for National Statistics (ONS) said that rises in the cost of fuel last month, reflecting the impact of the delivery difficulties that sparked panic-buying, were offset by other factors including falling restaurant and hotel costs to leave the Consumer Prices Index (CPI) measure relatively steady.

Economists had predicted CPI would remain at 3.2%.

But they warn that October's figure is set to shoot up - driven by the 12% leap in the energy price cap at the beginning of this month and wider increases in the cost of goods and services linked to the COVID global supply chain disruption and worker shortages - the latter made worse by the government's post-Brexit immigration rules.

The predictions of a dramatic upwards shift for living costs as price rises are passed on has prompted a change of tune among rate-setters at the Bank of England.

While most who have spoken out still see the price picture as transitory - a consequence of economies getting back in gear following pandemic lockdowns - there is now a clear admission at the top that inflation will prove more sticky than originally thought.

Bank governor Andrew Bailey gave his strongest hint yet on Sunday that Bank rate was to rise from its crisis low of 0.1%, with the markets seeing a 90% chance of a token increase next month.

He told a panel discussion the monetary policy committee (MPC) would "have to act" in response to rising energy prices as expectations of higher inflation in the longer term could have an impact on wage inflation ahead.

Any increase would likely to be passed on to mortgage customers not on fixed-rate deals.

At the same time, industry leaders are warning that the structural problems in the supply chain are forcing costs up at an alarming rate.

The head of the Food and Drink Federation told MPs on Monday: "In hospitality, inflation is running between 14% and 18%, which is terrifying."