UK inflation jumps above 40 years as food and energy prices soar

The cost of living in the UK jumped above its highest level in 40 years last month, driven by soaring energy and food prices.

That’s according to the city’s consensus forecast for new inflation numbers released on Wednesday from the Office for National Statistics (ONS).

Analysts expect prices to have risen 9.1 percent in the year to May, slightly above the four-decade high reading in April of nine percent.

However, some bake in a higher mutation.

What is driving inflation for May? “In short, everything,” said Sanjay Raja, chief economist at Deutsche Bank, adding that “inflation on every metric is now tracking new highs for several decades.”

He believes the cost of living has jumped 9.2 percent annually, in line with the Bank of England’s forecast for May data.

Britain’s cost-of-living crisis is being driven by a combination of high energy prices, a tight labor market, and historical gasoline prices.

European energy costs have soared due to limited capacity to store stocks, a fire at a US liquefied natural gas plant stifling trade flows and concerns about supplies as a result of Russia’s invasion of Ukraine.

Although the UK is not entirely dependent on continental energy supplies, prices in the block flow into markets where oil and gas come from.

Last week, the Bank of England warned that the rate of price hikes would rise to more than 11 per cent in October when the energy watchdog raises the securities cap again.

Governor Andrew Bailey and his colleagues chose to raise the interest rate by 25 basis points, bringing it to 1.25 percent, instead of the larger increase that his US counterpart at the Federal Reserve chose last Wednesday.

Markets believe that the bank will have to accelerate its tightening to counter inflation, as it expects rates to reach three percent at the beginning of next year.

Food prices also rose, partly because retailers were left behind by higher energy and staff costs and higher prices for basic foodstuffs – such as grain – due to Ukraine’s difficulty in exporting goods.

Prices of rents and services also jumped, increasing inflationary pressures.

Others point to a slowdown in core inflation – which excludes goods that are subject to price swings – as a sign of easing cost pressures.

Sharp rises in “prices for many services jumped in May and June 2021, as the end of the lockdown means the National Statistics Office has stopped entering data and prompting many companies to raise their prices,” said Samuel Tombs, UK chief economist at the Pantheon Economy. total.

by CityAM

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