Consumer prices in the United Kingdom hit a new forty-year high of 9.1% in May, the Office for National Statistics reported on Wednesday.
Senior economist’s remarks on CNBC
According to the Bank of England, headline inflation could go as high as 11% by the end of this year. Agreeing to the forecast on CNBC’s “Street Signs Europe”, Schroders’ Azad Zangana said:
We haven’t seen the full pass through yet of the energy price inflation because of the energy price cap that exists within the U.K. Most forecasters are looking for inflation to stay quite elevated for most of next year as well.
The reading was in line with expectations and succeeded a 9.0% year-over-year increase recorded in the prior month.
Why is inflation a bigger problem for the U.K.?
The FTSE 100 index closed in the green on Wednesday even though the U.K. is facing the highest inflation in the Group of Seven (G7). Explaining why, the senior European economist said:
We’ve had difficulties following Brexit with regards to supply of labour within the economy. It seems that the rise in home energy and fuel prices has fed through into higher wages more quickly than in other parts of the advanced world.
Following a fifth consecutive increase in interest rates last week, the central bank of the United Kingdom now has its main rate pegged at 1.25% – a 13-year high.
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