London: British inflation unexpectedly jumped above the Bank of England’s target when it reached 2.1%, which is expected to be part of a rising rise in prices. The acceleration of the consumer price index from 1.5% in April largely reflects how weak inflation was in May 2020 when the economy was swinging from its first tight close. The figure was the first time that inflation exceeded the BoE target of 2% in almost two years, and was above all 33 forecasts in a Reuters poll among economists which showed that inflation rose to 1.8% . Yields on UK government bonds rose early on Wednesday, with yields on two-year guilds – which are sensitive to speculation on BoE policy movements – briefly peaking in almost a month.
Increasing risk of inflation
Investors around the world are assessing the risks of a sustained rise in prices, particularly in the United States, where annual inflation reached 5.0% in May, the highest in nearly 13 years, and where President Joe Biden has a proposed stimulus package of $ 6 trillion. “Whether the latest news appears to be temporary or persistent, it’s clearly a false surprise,” said HSBC economist Chris Hare. “Of course, there are still major uncertainties, such as the end of the contract in September. But if the upside surprises continue, the monetary policy committee could increase the rate.” The CPI data showed that fuel prices in May were almost 18% higher than a year earlier, while the cost of clothing and footwear rose by 2.1% as people bought new outfits from their separate insulation.
The price data was collected on 11 May, before pubs and restaurants were allowed to serve customers indoors, and cinemas and hotels reopened from 17 May. The BoE said it expects inflation to reach 2.5% by the end of this year before returning to its 2% target, as the impact of the rise in energy prices rises, along with other cost pressures, such as bottlenecks in the supply chains. Previous inflation rises since the financial crisis in 2008 were temporary because the labor market was too weak to create the kind of wage price spirals that took place in the 1970s. The central bank is expected to leave the policy unchanged on June 24 after its latest meeting.
Experience of six months
Jack Leslie, an economist at the Resolution Brainstorm, said accelerating price growth from 0.3% in November to 2.1% in May was the fastest rise in six months since the collapse of the British dollar after the financial crisis. crisis 2008-09. “But the British inflationary pressure is different – and nowhere near as great – as that which is causing heated debate in the US,” Leslie said. Sterling rose slightly after the US figures. Nuclear inflation, which excludes the price of food, energy and other volatile items, rose to 2.0% in the twelve months to May from 1.3% in April, the Office for National Statistics said. There were signs of further price pressure in Wednesday’s data. The prices that manufacturers pay for their inputs rose by 10.7% in the 12 months to May, the highest since September 2011, and the prices they charged rose by 4.6%, the biggest increase since January 2012. House prices in April were 8.9% higher than a year earlier, down from a 9.9% rise in March, which was the strongest rise since 2007. The ONS said the decline in April reflected a rush of sales in March, when buyers expected the expiration of a stamp duty cut that had meanwhile been extended.