Last month, inflation in the United Kingdom reached its highest annual rate since 1982, forcing finance minister Rishi Sunak to provide additional assistance to people and the Bank of England to maintain interest rate hikes despite the possibility of recession.
The Office for National Statistics said on Wednesday that consumer price inflation exceeded 9 per cent in April, exceeding the highs of the early 1990s recession, which many Britons remember for sky-high interest rates and many mortgage defaults.
With Canada and Japan yet to post April data, Britain has the highest inflation among Europe's main economies and virtually likely in the Group of Seven. Neither is likely to match Britain's price rise, which appears to be more durable.
The International Monetary Fund predicted last month that Britain would have weaker economic growth and higher inflation in 2023 than any other large economy.
The main inflation driver was rising energy prices, which reflected an increase in regulated energy tariffs in April. Because of the fallout from Russia's invasion of Ukraine, those costs are expected to rise again in October.
"We cannot protect people completely from these global challenges but are providing significant support where we can, and stand ready to take further action," Sunak said.
Sterling sank after a Reuters survey of experts predicted a reading of 9.1 per cent, up from 7.0 per cent in March.
According to Britain's budget forecasters, households are facing the worst cost-of-living squeeze since records began in the 1950s, and consumer confidence is at an all-time low.
Sunak was encouraged to act immediately by anti-poverty activists, beginning with an increase in social benefits.
"(Sunak's) inaction will make an already desperate situation for many even worse," Rebecca McDonald, senior economist at the Joseph Rowntree Foundation which campaigns for lower-income households, said.
According to a study released on Tuesday, two-thirds of individuals had left their heaters off when they would normally have turned it on, almost half had driven less or switched supermarkets, and just over a quarter had skipped meals. continue reading
According to the ONS, food costs increased by over 7 per cent for the year to April.
On Monday, Governor Andrew Bailey of the Bank of England warned MPs that rising food prices were a serious concern, apologising for "being apocalyptic for a second."
While the government touts its 22 billion pound ($27.4 billion) package of household support so far, recent tax rises on workers cancel out much of this.
Sunak was reportedly working on measures to reduce taxes and improve home heating benefits by hundreds of pounds, according to the Times newspaper.
Restaurant and café prices rose as value-added tax rates returned to pre-pandemic levels in April, contributing to the increase in inflation last month.
The Bank of England predicted that inflation would hit 10% later this year, and investors expect the central bank to add to the four interest rate hikes it has made since December, bringing the Bank Rate to 1%, the highest level since 2009.
The Bank of England was chastised this week by Bank of America for not being explicit about its approach, perhaps leaving it subject to political attacks and putting the economy in jeopardy.
"The BoE reaction function has become less transparent and monetary policy more at risk of perceived politicisation," it said in a report. "As a result inflation expectations may be less anchored so we expect higher interest rate, growth and inflation volatility."
Last week, Liam Fox, a former Conservative defence minister, criticised the Bank of England of failing to predict the inflation spike, and the Sunday Telegraph reported that current ministers, who were not named, were also unhappy.
Despite the current obstacles, Sunak told parliament on Tuesday that "the record of 25 years of central bank independence speaks for itself."
Retail price inflation, which the ONS claims is no longer reliable but is frequently employed in business contracts and to calculate interest payments on inflation-linked government bonds, increased to 11.1 per cent, the highest level since 1982.
There were hints that inflation would continue to rise. Manufacturers experienced the equal largest increase in raw material prices on record, up 18.6%, matching March's peak.
Prices grew by 14.0 per cent in the year to April, the largest increase since July 2008.
(Source:www.financialpost.com)
The Office for National Statistics said on Wednesday that consumer price inflation exceeded 9 per cent in April, exceeding the highs of the early 1990s recession, which many Britons remember for sky-high interest rates and many mortgage defaults.
With Canada and Japan yet to post April data, Britain has the highest inflation among Europe's main economies and virtually likely in the Group of Seven. Neither is likely to match Britain's price rise, which appears to be more durable.
The International Monetary Fund predicted last month that Britain would have weaker economic growth and higher inflation in 2023 than any other large economy.
The main inflation driver was rising energy prices, which reflected an increase in regulated energy tariffs in April. Because of the fallout from Russia's invasion of Ukraine, those costs are expected to rise again in October.
"We cannot protect people completely from these global challenges but are providing significant support where we can, and stand ready to take further action," Sunak said.
Sterling sank after a Reuters survey of experts predicted a reading of 9.1 per cent, up from 7.0 per cent in March.
According to Britain's budget forecasters, households are facing the worst cost-of-living squeeze since records began in the 1950s, and consumer confidence is at an all-time low.
Sunak was encouraged to act immediately by anti-poverty activists, beginning with an increase in social benefits.
"(Sunak's) inaction will make an already desperate situation for many even worse," Rebecca McDonald, senior economist at the Joseph Rowntree Foundation which campaigns for lower-income households, said.
According to a study released on Tuesday, two-thirds of individuals had left their heaters off when they would normally have turned it on, almost half had driven less or switched supermarkets, and just over a quarter had skipped meals. continue reading
According to the ONS, food costs increased by over 7 per cent for the year to April.
On Monday, Governor Andrew Bailey of the Bank of England warned MPs that rising food prices were a serious concern, apologising for "being apocalyptic for a second."
While the government touts its 22 billion pound ($27.4 billion) package of household support so far, recent tax rises on workers cancel out much of this.
Sunak was reportedly working on measures to reduce taxes and improve home heating benefits by hundreds of pounds, according to the Times newspaper.
Restaurant and café prices rose as value-added tax rates returned to pre-pandemic levels in April, contributing to the increase in inflation last month.
The Bank of England predicted that inflation would hit 10% later this year, and investors expect the central bank to add to the four interest rate hikes it has made since December, bringing the Bank Rate to 1%, the highest level since 2009.
The Bank of England was chastised this week by Bank of America for not being explicit about its approach, perhaps leaving it subject to political attacks and putting the economy in jeopardy.
"The BoE reaction function has become less transparent and monetary policy more at risk of perceived politicisation," it said in a report. "As a result inflation expectations may be less anchored so we expect higher interest rate, growth and inflation volatility."
Last week, Liam Fox, a former Conservative defence minister, criticised the Bank of England of failing to predict the inflation spike, and the Sunday Telegraph reported that current ministers, who were not named, were also unhappy.
Despite the current obstacles, Sunak told parliament on Tuesday that "the record of 25 years of central bank independence speaks for itself."
Retail price inflation, which the ONS claims is no longer reliable but is frequently employed in business contracts and to calculate interest payments on inflation-linked government bonds, increased to 11.1 per cent, the highest level since 1982.
There were hints that inflation would continue to rise. Manufacturers experienced the equal largest increase in raw material prices on record, up 18.6%, matching March's peak.
Prices grew by 14.0 per cent in the year to April, the largest increase since July 2008.
(Source:www.financialpost.com)
