June 20, 2024

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UK inflation hits multi-decade high at 6.2%

UK inflation hits multi-decade high at 6.2%

LIVERPOOL, UK – JANUARY 23: On the day Britain officially enters a recession, shoppers walk through Liverpool city center on January 23, 2009 in Liverpool, UK. Figures released today confirm that the UK is officially in recession for the first time since the early 1990s after falling GDP in two consecutive quarters of 2008.

Photo by Christopher Furlong/Getty Images

LONDON – UK inflation averaged 6.2% annually in February, its highest level since March 1992, as rising food, fuel and energy costs continued to exacerbate the country’s cost-of-living crisis.

The February CPI reading was above expectations among economists polled by Refinitiv for the 5.9% annualized figure.It smartly surpassed a 30-year high in January at 5.5%.

On a monthly basis, CPI inflation was 0.8%, beating expectations for a 0.6% rise and marking the largest monthly CPI increase between January and February since 2009.

The Bank of England It has raised interest rates in three consecutive monetary policy meetings, raising borrowing costs from a historic low of 0.1% to 0.75%, as it looks to contain runaway inflation without hampering economic growth.

The The Monetary Policy Committee issued a more pessimistic tone than expected by the market last week, highlighting pressure on household income amid a sharp rise in the prices of the following commodities Russia’s invasion of Ukraine. Policy makers now expect inflation to peak at 8% in the second quarter of 2022.

The consumer price index including housing costs for landlords (CPIH) – the preferred measure by the Office for National Statistics – rose 5.5% in the 12 months to February 2022, up from 4.9% in the 12 months to January.

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“The largest increased contributions to inflation in the 12-month CPI for February 2022 came from housing and household services (1.39 percentage points, primarily from electricity, gas and other fuels, and housing costs for owners) and transportation (1.26 percentage points, primarily. Automobile fuels and used cars,” the Office for National Statistics explained in its report on Wednesday.

spring statement

British Finance Minister Rishi Sunak is under pressure to tackle the cost of living crisis when he delivers his Spring Statement later on Wednesday.

A planned 10% increase to National Insurance (a tax on profits) for many workers began in April, while at the same time the UK energy price ceiling is rising by 54% to accommodate rising oil and gas costs, exacerbating pressure on household income as the trend continues. Consumer prices north, and the Russian war in Ukraine has shown little sign of abating.

“Inflation data this morning shows just how dire the situation is, and there is a clear need for the government to help save many from slipping into financial hardship as their wages are rapidly being swallowed up,” said Paul Craig, portfolio manager at Quilter. Investors.

“Advanced markets and economies continue to battle high inflation along with uncertainty surrounding the Russian war on Ukraine. Given the sensitive market environment, investors will need to monitor data and markets closely and customize accordingly.”

Dan Boardman-Weston, chief investment officer at BRI Wealth Management, noted that while fuel costs remain a major contributor to UK inflation, the weight of their contribution to the overall rate appears to be slowing.

“The data continues to point to a few more months of uptick in inflation, but we expect this to ease as we head into the summer. Given the strength of the labor market and the general economy, it seems inevitable that England will continue down the path of further inflation,” Boardman Weston said. price increases.

“Rising interest rates at a time when household bills are high and taxes are high could stifle economic recovery by putting the consumer under severe stress. The Bank will need to carefully balance the need to try to tame inflation while not pushing the economy into recession.”