Sat, 23 Sep 2023

UK inflation hits 40-year high at 9.1% in May

Robert Besser
24 Jun 2022, 17:28 GMT+10

LONDON, England: Surging food prices in the UK pushed consumer price inflation to 9.1 percent last month, a 40-year record and the highest rate in the Group of Seven (G7) countries, underscoring the severity of the current cost-of-living crisis.

This figure is higher than the 9.0 percent recorded in April, and is the highest since March 1982, according to records from the Office for National Statistics.

Meanwhile, the UK pound fell below $1.22 to the U.S. dollar, down 0.6 percent on the day, before later recovering.

The UK is seen by many investors to be at risk of both persistent high inflation and recession, due to its reliance on imported energy and the effects of Brexit, which could further hurt its trade relations with the European Union (EU).

"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 judgements particularly tough," according to Jack Leslie, senior economist at the Resolution Foundation think tank, as reported by Reuters.

Also, the Resolution Foundation said the effects of the cost-of-living crisis on households was being compounded by Brexit, with damaging long-term repercussions for productivity and wages.

With average wages not keeping up with inflation, trade unions have warned of major strikes in the coming months, as railway workers have already begun a strike this week.

Last week, the Bank of England said over the coming months inflation was likely to remain above 9 percent before peaking at just over 11 percent in October, when the cap on household energy bills is scheduled to rise again.

Meanwhile, Rishi Sunak, Chancellor of the Exchequer, said the British government was exerting all efforts to counter a surge in prices, and the Bank of England would act "forcefully" to contain inflation.

However, Sandra Horsfield, economist at Investec, said, "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," as reported by Reuters.

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