Official figures revealed Wednesday that the British consumer price inflation rose to 10.1% in July. This is its highest level since February 1982. It was 9.4% in June.
According to Reuters, the increase was higher than all economists expected. It will not ease the Bank of England’s concern that inflation may rise to 9.8% in July.
The BoE raised its key interest rates by 0.5% to 1.755% in early October despite warnings of a possible recession. This is its first half-point increase since 1995.
Luke Bartholomew (senior economist at asset management abrdn) stated that every upward inflation surprise tightens a BoE’s bind, which is characterized by mounting inflation pressure and growing recessionary headwinds.
Like most economists polled by Reuters earlier this week, he expects the BoE will raise interest rates by half a point to 2.25% at its September meeting.
The yields on two-year British government bonds – which are sensitive to interest rate expectations and have risen to their highest level since June 21st, when they reached a 13-year high.
The Office for National Statistics released Wednesday’s numbers. They showed that July prices increased 0.6% from June, on a non-seasonally adjusted basis. Retail price inflation reached 12.3% in the year, which is its highest level since March 1981.
The UK is not the only country facing high prices, but it has signs that it will struggle with rising inflation longer than other countries.
Many economists believe that the U.S. has reached its peak after falling to 8.5% in July, from 9.1% in June (a record-setting four decades ago).
Nadhim Zahawi, British finance minister, stated that he had made it his top priority to control inflation.
