Britain’s consumer prices rose 10.1 per cent in September from a year earlier, continuing their steep rise as the nation grapples with rapidly rising food prices, soaring energy costs and political uncertainty.
The annual inflation rate is back at its fastest pace since 1982, matching the pace set in July. It rose from 9.9 percent in August. Inflation was expected to peak next month, at a slightly higher rate, but a Reflection in government policy Maintaining home energy bills has made the future course of prices more uncertain.
Prices were pushed up by significant increases in the cost of food and, to a lesser extent, hotel and restaurant bills, in September. Food prices rose 14.5 percent last month from a year earlier, the largest annual rise in more than 40 years, according to the Office for National Statistics. High energy costs were still contributing to inflation growing at its fastest pace in decades. But price increases are spread across goods and services, so core inflation, which excludes food and energy prices, rose 6.5 percent from a year earlier, up from 6.3 percent in August.
It is another sign of the weight of inflation that politicians and policymakers around the world are facing. In the year to September, consumer prices rose 9.9 percent in Euro-zone and by 8.2 percent in United State, near its highest level in four decades. This encourages central bankers to push ahead with sharper rate hikes, in an effort to send an assertive message that they will bring inflation back down and not let rapid rate increases take hold in the economy.
But ever-changing fiscal policies, as governments try to support families by increasing the cost of living, also complicate the picture.
Less than six weeks ago, British Prime Minister Liz Truss pledged to Freeze home energy bills, one of the biggest sources of inflation, from October to next winter. This week, a lot of Ms. Truss’s economic agenda canceled By Britain’s new finance minister, Jeremy Hunt, as he tried to restore calm in financial markets, which had apparently stopped believing in the government’s fiscal credibility. Ms Truss apologized to lawmakers on Wednesday for “mistakes”, but political turmoil continued a few hours later when High-ranking minister resigned.
One casualty of Mr Hunt’s policy reversal was Mrs. Truss’s high-profile energy bills policy; The British are now guaranteed to have their bills frozen only until April. Then the government said it would come up with a less expensive and more targeted plan to help people with their bills.
Pantheon Macroeconomics wrote in a research note this week that if households were to return to paying a price cap set by market prices through Ofgem, the government’s energy regulator, the headline inflation rate would rise by about five percentage points. But they said it was too early to predict what was likely to happen because the government was still developing a new plan to help with post-April bills.
The Bank of England It has raised interest rates since December to counter inflation. And it raised interest rates in its last two meetings by half a percentage point, that is, double its previous movements, amid indications of widening inflationary pressures, especially in the labor market, where wages are rising and large numbers of people remain outside the labor force.
While the central bank is expected to continue raising interest rates for several more months, analysts are wondering how high interest rates will be and how long the increases will continue as the UK economy slows. High inflation is putting pressure on household budgets and there are increasing expectations that the economy will contract next year amid a decline in consumer spending.
The International Monetary Fund expects the British economy to move from 3.6 per cent this year to a contraction of 0.3 per cent next year “as high inflation reduces purchasing power and tight monetary policy negatively impacts consumer spending and business investment”.
Traders are now betting that the central bank will raise interest rates above 5 percent next year from 2.25 percent.
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