The pound slides after soaring food prices drive UK inflation back to a 40-year high of 10.1%

• The British pound fell below $1.13 Wednesday after UK inflation hit 10.1% in September.
• Soaring food and housing costs helped drive inflation back to the 40-year high hit in July.

The British pound dropped below $1.13 against the dollar Wednesday after UK inflation jumped back to a 40-year high.

The UK consumer price index climbed to 10.1% in September, figures released Wednesday by the Office for National Statistics showed. That compares with a reading of 9.9% in August, and matches July's high of 10.1%.

The pound fell 0.5% to $1.1269 after the report's release, having traded above $1.13 earlier in the day.

The biggest rise in food prices since 1980 helped push the inflation rate back into double digits, the ONS said. Other drivers were increases in the cost of housing and energy, with gasoline price rises a key factor.

The red-hot inflation rate will likely put pressure on the Bank of England to accelerate its interest rate hikes at its policy meeting on November 3, analysts said. Most expect the UK central bank to raise rates by 75 basis points then.

"The government's fiscal U-turn may have partially eased the pressure on the Bank of England, yet this morning's inflation data provides another stark reminder of the breadth of inflationary pressures in the economy," Hugh Gimber, global market strategist at JP Morgan Asset Management, said.

"The uptick in food prices will be of particular concern," he added.

The UK's new finance minister on Monday scrapped most of the government's planned tax cuts announced just three weeks ago by his predecessor, Kwasi Kwarteng, and scaled back help for businesses and households with rising energy costs. The news of the coming huge tax cuts sent the pound plunging to an all-time low against the dollar.

The inflation figures indicate that the cost-of-living crisis in the UK is set to continue, as rising prices step up the pressure on incomes. Signs of prices rising beyond core areas is a warning sign for the likelihood of an economic slowdown.

"This morning's report clearly highlights how price pressures have now spread to non-discretionary spending items (such as food), making it far more difficult for consumers to change their spending patterns to avoid the squeeze," Gimber said.