Records from the Office for National Statistics show May’s inflation was highest since March 1982. The reading was up from 9.0% in April and soaring food prices pushed British consumer price to a 40-year high of 9.1% last month which is the highest rate out of the Group of Seven countries and one which threatens the country’s cost of living crunch and the worse is likely to come.
“With the economic outlook so unclear, no one knows how high inflation could go, and how long it will continue for – making fiscal and monetary policy judgments particularly tough,” said Jack Leslie, senior economist at the Resolution Foundation think tank.
Some investors predict that Britain is at the verge of recession, reflecting its high imported energy bill and ongoing Brexit-related friction which could affect further and hurt ties with European Union. Sterling, one of the weakest currencies against US dollar fell below $1.22, 0.6% of the day, before later recovering. The Resolution Foundation on Wednesday said that the cost of living hit for households was being compounded by Brexit which will damage long term imputation for productivity and wages.
Trade Unions have warned of widespread strikes in the coming months as average pay is not keeping up with inflation. Railway staff have already rendered mass walkouts this week. Britain’s inflation rate has been higher than United States, France, Italy and Germany in the month of May while Japan and Canada have still to report the consumer data for May. The Bank of England has reported that inflation is likely to remain above 9% in the coming months and will cross 11% in October when regulated household energy bills are due to rise again.
Rishi Sunak, the finance minister said that the British government is doing all that could be done to fight this rise in prices and the central bank would act forcefully to keep up with this inflation. The biggest driver of annual inflation last month had been non-alcoholic drinks which rose by 8.7% in annual terms in May-the biggest jump since March 2009. Annual core Inflation- which strips out food and energy costs to give a thought of locally created cost pressure – succumbed to the initial time since September to 5.9% from 6.2%, a lower-than-anticipated perusing.
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“The Bank of England may indeed gain some hope from the fact that core price pressures are subsiding (but) we doubt this … will be enough to avert further rate rises in the coming months,” said Sandra Horsfield, an economist from Investec. Overall, consumer prices rose by 0.7% in monthly terms during May, the ONS said, a little more than 0.6% consensus. Costs paid by British factories for material and energy were 22.1% higher in May as compared to last year. The ONS said that the biggest increase in these records began in 1985