The pound has fallen after inflation held steady at its five-year high in October

Courtney Goldsmith
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Inflation hit a five-year high in September (Source: Getty)

The pound dipped this morning after official figures showed inflation remained unchanged last month from its highest level in more than five years.

The consumer prices index held steady at three per cent in October, figures by the Office for National Statistics (ONS) showed, while analysts had expected another rise.

The CPIH, which factors in housing costs, was also unchanged from the previous month at 2.8 per cent.

Meanwhile the inflation rate for food and non-alcoholic beverages continued to increase to 4.1 per cent, the highest since September 2013.

Following the announcement, the pound edged lower against the dollar, falling 0.3 per cent to $1.3077, and dropped 0.6 per cent against the euro to €1.1175.

If the inflation figure hits 3.1 per cent, as many analysts expected it would today, Bank of England (BoE) governor Mark Carney is forced to write a letter to the chancellor explaining why prices are rising far faster than the target rate of two per cent.

"The data will come as a pleasant relief to the BoE who themselves projected an increase to 3.2 per cent in today’s number," said David Cheetham, chief market analyst at XTB Limited.

"It is safe to say governor Carney will be quietly pleased with the data point and hope that the rise in inflationary pressures have begun to wane."

Chris Williamson, chief business economist at IHS Markit, added: "The recent surge in price pressures has primarily due to the depreciation of the sterling since last year’s EU referendum, which has increased the cost of imported goods and services, but today’s numbers will add to the sense that the worst of this impact has already passed."

Williamson said:

As far as interest rates are concerned, today’s numbers will dampen expectations on whether we will see further rate hikes anytime soon, though more important will be tomorrow’s wage data.

An absence of stronger pay growth alongside today’s unexpectedly steady inflation numbers will therefore not only dampen expectations that rates will rise again, but will lead to further debate over the wisdom of the Bank’s recent rate hike.

The BoE raised its key interest rate to 0.5 per cent for the first time in 10 years earlier this month.

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