U.K. inflation reaches a 30-year high of 7% as energy prices increase

UK inflation reaches a 30 year high of 7 as energy prices increase

April 14, 2022: -U.K. inflation reached an annual 7% in March as soaring food and energy prices continue to squeeze consumers and create a dilemma for policymakers.

Consumer prices surged by 1.1% month-on-month, outstripping expectations for a 0.7% rise in a Reuters poll of economists, projected a 6.7% annual increase.

The 7% annual increase in the consumer price index is the highest since March 1992, outstripping the 6.2% increase recorded in February.

From April 1, the U.K. energy regulator increased the household energy price cap by 54% following an increase in energy prices, which included a record rise in global gas prices.

The Bank of England has raised interest rates at three consecutive monetary policy meetings, raising the borrowing costs from their historic low of 0.1% to 0.75%, containing runaway inflation without stomping out economic growth.

Central banks worldwide face balancing between tackling soaring inflation and signs of slowing economic growth, with the Russia-Ukraine war dampening economies’ recovery from the Covid-19 pandemic.

The senior economist and director at S&P Global Ratings, Boris Glass, said British inflation rates would likely rise and remain high throughout 2022.

“The raising of the cap on household energy bills will add an extra point by the end of this month. The surge in inflation will hit household budgets hard, especially those on lower incomes who have now exhausted pandemic savings,” Glass said on Wednesday.

“While the short term is painful, the bulk of high inflation should start falling as early as next winter if global energy prices do not continue to increase further.”

Even if and when inflation falls, Glass says it will remain above the central bank’s target well into the coming year. He said that inflation would decline more slowly and last considerably longer if energy price caps increased further in October.

“The Bank of England is worried about medium-term inflation. While high rates are largely due to global energy prices, domestic items are gathering momentum increasingly to justify that worry,” Glass added.

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U.K. inflation reaches a 30-year high of 7% as energy prices increase
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U.K. inflation reaches a 30-year high of 7% as energy prices increase
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U.K. inflation reached an annual 7% in March as soaring food and energy prices continue to squeeze consumers and create a dilemma
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