UK inflation tops 10pc, highest since 1982Breaking

August 18, 2022

British consumer price inflation jumped to 10.1% in July, its highest since February 1982, up from an annual rate of 9.4% in June, intensifying the squeeze on households, official figures showed on Wednesday. The increase was above all economists forecasts in a Reuters poll for inflation to rise to 9.8% in July, and will do nothing to ease the Bank of England concerns that price pressures may become entrenched. Despite warning that a recession was likely, the BoE earlier this month raised its key interest rate by 0.5% to 1.75% - its first half-point rise since 1995.It forecast inflation would peak at 13.3% in October, when regulated household energy prices are next due to rise. Every upward inflation surprise tightens the bind the BoE finds itself in, with mounting inflation pressure combined with growing recessionary headwinds, said Luke Bartholomew, senior economist at asset management at asset manager abrdn.

He, like most economists in a Reuters poll earlier this week, expect the BoE to raise interest rates by a further half point to 2.25% at its next meeting in September. Two-year British government bond yields - which are sensitive to interest rate expectations - surged to their highest since June 21, when they had struck a 13-year high. Wednesday figures from the Office for National Statistics showed thatprices rose 0.6% in July from June on a non-seasonally adjusted basis. The annual rate of retail price inflation hit 12.3%, its highest since March 1981. Britain is not alone in facing soaring price growth but there are signs it will continue to struggle with rising inflation for longer than other countries.

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