Britain’s annual inflation rate has touched double digits, climbing to 10.1% in July from a year earlier – the fastest increase since 1982. US And consumer prices are rising even faster in the UK than in Europe, driven by higher food and energy costs.
The Office for National Statistics (ONS) said on Wednesday that the jump in the UK consumer price index was higher than analysts’ forecast of 9.8% and an annualized rate of 9.4% in June. This increase was mainly due to rising prices of food and staples, including toilet paper and toothbrushes.
Core inflation, which separates volatile, food and energy prices, also exceeded analyst forecasts, reaching 6.2% in July.
Analysts at TD Securities said, “As expected, food was the main driver of inflation, but drivers were broad-based, such as clothing, fares and travel [and] transportation services also exerting significant upside pressure on both core and headline.” ” In a research note.
Expect inflation in adolescence
Most economists believe that the times to come will be worse. The Bank of England says a hike in natural gas prices is likely to push consumer price inflation to 13.3% in October. It says it will push Britain into a recession that is expected to last until 2023. Accounting for inflation, wages in the UK fell at an annual rate of 3% in the second quarter, according to the ONS.
Those pressures persuaded the bank to raise its key interest rate by half a percentage point this month, the biggest increase for six in a row since December. The rate is now at 1.75%, the highest since the depth of the global financial crisis in late 2008.
“We expect another 50bp (basis point) rate increase in September,” said James Smith, developed market economist and ING economics. “We won’t rule out another hike in November.”
Inflation is rising in many countries as Russia’s war in Ukraine has caused an unprecedented rise in energy prices around the world. Russia has reduced natural gas shipments to Europe in retaliation for the West’s support of Ukraine, triggering a crisis for the fossil fuel that powers factories and heats homes in winter.
The 19 countries that share the euro currency are at risk of a gas crisis, where inflation hit a record 8.9% in July. The United States has already seen two-quarters of an economic contraction, raising fears of a recession. US inflation eased somewhat to 8.5% in July, but is still close to a four-decade high.
“Encouraging evidence that the upward pressure on underlying inflation from global factors is beginning to ease will be of little comfort to the Bank of England,” said Ruth Gregory, senior UK economist, indicating that it is likely to see more persistent domestic inflation. being replaced by pressures.” With Capital Economics, said in a report.
release of incentive payments
“I understand that times are tough, and people are concerned about the price hikes that countries around the world are facing,” said UK Treasury chief Nadim Jahvi.
“While there are no easy solutions, we are helping wherever we can,” he said, which includes paying £400 ($483) to families facing rocketing energy bills.
Britain’s Conservative government is under pressure to do even more to help people deal with the crisis of livelihood. The average UK household fuel bill has risen more than 50% this year, and a further increase is due in October, when the average bill is projected to hit 3,500 pounds ($4,300) a year.
Prime Minister Boris Johnson is due to leave office next month and says any new measures should be left to his successor. Foreign Secretary Liz Truss, her favorite to replace him, opposes the major intervention, saying she supports tax cuts on “handouts”.
The other contender, former Treasury chief Rishi Sunak, introduced a 25% windfall tax on oil and gas companies’ profits in May, hoping to raise several billion pounds to help fund payments for those with rising utility costs. Opposition politicians want the tax expanded to power firms – a move the truss strongly opposes, saying, “I don’t think profit is a dirty word.