Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

ANY celebration at the slight easing of price rises reported today is likely to be short.

The headline rate of Consumer Price Index (CPI) inflation dipped to 3.1% in September, down from 3.2% in August, the Office for National Statistics confirmed this morning. That counts as slightly better news for households, who have been bombarded for weeks with warnings that prices are about to take off.

Delve underneath the headline numbers, however, and the news on prices is still worrying. At 3.1%, inflation is still running well above the Bank of England’s target range of 2%.

What’s more, the dip in CPI was driven by a quirk in the statistics more than anything else. Last year’s Eat Out to Help Out scheme subsidised restaurant prices last summer and ended in September 2020, pushing menu prices higher at that stage. The fact that September 2021 saw no commensurate rise in prices means that there was a downward effect on the inflation numbers. Got that? (lies, damn lies… etc)

Restaurant prices not rising as quickly as last year is all well and good but most families will be more focussed on costs they can’t avoid, and here the news is much less rosy. According to the ONS, prices in all other areas including food, energy bills and motor fuel made upward contributions to the rate of inflation. Average petrol prices, for example, are at an eight-year high, while planned increases in energy bills are still to be fully reflected in the figures, and are likely to push the rate higher when they are.

One stand out figure from the inflation data today was the startling rise in second-hand car prices - up 2.9% in a month and 21.8% over a year thanks to a shortage of semiconductors for new cars, which has turned into a shortage of nearly-new cars for sale this year. Not a problem if you don’t need to buy a car, a big problem if you do.

And there’s reason to think that the prices we pay have much further to rise. As well as consumer prices, the ONS published prices for items at different stages of the supply chain. So-called ‘factory gate’ prices - of wholesale goods before they are sold by retailers - were up 6.7%. Prices for raw materials are also sharply higher, with the input inflation rate for metals up to 19.8% annually.

This only adds to the difficulties facing the Bank of England, which must decide whether a rise in interest rates is needed to help curb demand and ease inflation. The Bank has shifted stance this year, arguing that the rise in inflation was likely to be temporary before strengthening its message and warning that it may now have to act.

A rise in the Bank of England rate (which markets expect to happen in December) won’t translate directly into higher mortgage costs - unless you’re on a tracker mortgage - but it will certainly add to the anxiety of many households as they try to make their monthly budget stretch further.

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.

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