UK inflation hits 10.1% as food and energy prices soar

LONDON — Britain’s inflation rate hit a new 40-year high of 10.1% in July, a faster pace than in the US and Europe, as rising food prices in the UK UK has tightened pressure on the cost of living fueled by soaring energy costs.

The double-digit rise in consumer prices on a year earlier was above analysts’ central forecast of 9.8% and a jump from the annual rate of 9.4% in June, the Office said on Wednesday. national statistics. The increase is largely due to higher prices for food and basic necessities, including toilet paper and toothbrushes, he said.

Most economists think the worst is yet to come. The Bank of England says soaring natural gas prices are expected to push consumer price inflation to 13.3% in October. He says it will push Britain into a recession that is expected to last until 2023.

Those pressures persuaded the bank to raise its key rate by half a percentage point this month, the biggest of six consecutive hikes since December. The rate now stands at 1.75%, the highest since the depths of the global financial crisis at the end of 2008.

“We expect another 50 bps (basis points) rate hike in September,” said James Smith, developed markets economist at ING Economics. “We’re not ruling out another hike in November.”

Inflation is soaring in many countries as Russia’s war in Ukraine has triggered unprecedented increases in energy prices around the world. Russia has cut natural gas shipments to Europe in retaliation for Western support for Ukraine, creating a crisis for the fossil fuels that power factories and heat homes in winter.

Gas woes threaten a recession in the 19 countries sharing the euro, where inflation hit a record 8.9% in July. The United States has already experienced two quarters of economic contraction, intensifying fears of a recession. US inflation eased somewhat to 8.5% in July, but is still near a four-decade high.

“I understand that times are tough and people are worried about the price increases that countries around the world are facing,” said UK Treasury chief Nadhim Zahawi.

“Although there are no easy solutions, we are helping where we can,” he said, including a 400-pound ($483) payment to households facing energy bills. sharply.

The British Conservative government is under pressure to do even more to help people cope with the cost of living crisis. The average UK household fuel bill has risen by more than 50% this year, with another rise expected in October, when the average bill is expected to reach 3,500 pounds ($4,300) a year.

Prime Minister Boris Johnson is due to leave office next month and says any further measures should be left to his successor. The favorite to replace him, Foreign Secretary Liz Truss, opposes a major intervention, saying she prefers tax cuts to “handouts”.

The other candidate, former Treasury chief Rishi Sunak, in May introduced a windfall tax of 25% on the profits of oil and gas companies, which is expected to raise several billion pounds to help finance the payments of people whose utility costs are rising. Opposition politicians want the tax extended to power companies – a move Truss strongly opposes, saying: “I don’t think profit is a dirty word.”

ABC News

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