UK inflation spikes in August, putting central bank on the spot
The jump in prices come on the back of 'erratic' factors, the ONS said.
LONDON — Inflation in the U.K. jumped by 3.2 percent in August compared to July, prompting renewed concern about the Bank of England’s forecasting.
“August saw the largest rise in annual inflation month on month since the series was introduced almost a quarter of a century ago,” noted Deputy National Statistician for Economic Statistics Jonathan Athow, noting the “temporary” and “erratic” factors such as higher prices for computer games and restaurant and café costs.
The Bank of England forecast in August that inflation would peak at 4 percent briefly this year before falling back. But experts in the private sector see it going higher after today’s figure. The central bank’s mandate requires it to keep inflation at 2 percent.
The Office of National Statistics release “is the first step in a rise that may take inflation to 4.5 [percent] or above by November,” according to Capital Economics, a consultancy. “But as inflation will fall back almost as sharply next year, we don’t think the [Bank of England] will raise interest rates until mid-2023.”
HSBC economists, on the other hand, are forecasting two BoE rate hikes in 2022, pointing to “a more persistent upside inflation risk” coming from cost pressures via the labor market, according to a client note seen by POLITICO.
For its part, the opposition Labour party is pinning blame for inflation on the government, citing upward wage pressure coming from staff shortages linked to a post-Brexit crackdown on EU migration as one factor.
“People are already feeling the effects of inflation, in their weekly shop and at the petrol pump,” said Labour’s Shadow Chief Secretary to the Treasury Bridget Phillipson. “The Government must do all it can to secure the supply chains that keep our economy going, and shouldn’t be hitting families with a devastating cut to Universal Credit and tax rises.”