December 10, 2023

UK: Prices Continue to Rise – Inflation At 30-Year High By

© Reuters.

by Jeffrey Smith – Global energy and food prices continue to rise. In March, inflation in Britain soared to its highest level in more than 30 years, exacerbating the cost-of-living crisis in the island nation.

Consumer and producer prices alike rose more than expected for the sixth month in a row. The annual growth rate rose to 7.0% and 11.9%. Compared to the previous month, consumer prices rose 1.1% and producer prices increased 2.0%.

As in many other countries, prices rise much faster than wages. Data released Tuesday showed that the annual rate through February rose 5.4%.

The numbers are likely to get worse in April, because that’s when the big jump in regulated energy prices for households takes effect. The timing of this is particularly bad for the UK government, where Social Security contributions are also set to rise from April 1. However, a subsequent cut in income taxes by Treasurer Rishi Sunak could mitigate the effect somewhat.

The numbers come a day after the US hit a 40-year high of 8.5%, largely due to gasoline, food and home prices, and on the same day that the first major central bank in an industrialized nation raised interest rates by 50 basis points. point since the start of the epidemic.

Accordingly, they should once again be under pressure to fight inflation with more aggressive measures. After the latest rate hike, the bank indicated that it expects the economy to cool later in the year, reducing the likelihood of another rate hike. By 8:45 AM CET, the pound had not changed much at $1.2995.

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As Simon French, chief economist at Panmore Gordon, tweeted, “The UK March CPI data does not change our view that CPI will peak at around 10% this year.”

He cited “signs of broader inflationary pressures in core products and a massive increase in input costs”.

French said he believes the most likely scenario is for the Bank of England to raise interest rates by 25 basis points at its meeting in May and announce a way to reduce UK government bond purchases.