UK inflation rises sharply, turning heat on Bank of England
U.K. inflation for June reached 2.5 percent, thanks to “widespread” price increases across the consumer economy, according to figures out today from the Office for National Statistics.
The numbers pile pressure on the Bank of England, which has refrained from increasing interest rates or cutting back on bond-buying despite its mandate demanding it steer inflation to 2 percent.
The Bank of England has justified its stance by forecasting inflation will be temporary, reaching 3 percent this year before falling back to below-target levels. Governor Andrew Bailey said the institution was ready to hike rates if its predictions are proven wrong.
“Inflation rose for the fourth consecutive month to its highest rate for almost three years,” said ONS Deputy National Statistician Jonathan Athow in a media statement today. “Some of the increase is from temporary effects, for example rising fuel prices which continue to increase inflation, but much of this is due to prices recovering from lows earlier in the pandemic.”
Economists are also holding their nerve for the time being. “We think this surge in inflation will be temporary, which means the Bank of England won’t tighten policy in response,” said Paul Dales, chief U.K. economist at Capital Economics, a consultancy. Dales said inflation would rise to around 4 percent toward the end of the year, partly due to global trends such as growing commodity and used car prices.
In the U.S., the consumer price index rose 5.4 percent in June from the same month last year, the biggest jump since 2008, data published Tuesday showed.