UK inflation updates
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Inflation in the UK last month jumped faster than at any time since the Bank of England gained independence to set its interest rate, rising 1.2 percentage points to 3.2 per cent.
The unexpected surge will undermine the central bank’s view that price rises are manageable and temporary with more expected this autumn in a serious squeeze in living standards.
With prices climbing 0.7 per cent in the month of August alone, the main cause of the rise reflected sharp monthly increases in food, transport, furniture and restaurant prices as the government relaxed coronavirus restrictions. Prices in each of these categories rose more than 1 per cent in the month compared with July.
The rest of the 1.2 percentage-point rise in recorded CPI inflation was the result of price cuts a year ago in August when restaurants and pubs lowered their charges when the government offered temporary help with its “Eat out to help out” scheme.
With the BoE already expecting inflation to rise to 4 per cent by the end of the year, the rapid acceleration at the start of the period will come as a shock. It follows strong labour market data on Tuesday, suggesting the economy is running hotter than many economists have believed up to now.
Yael Selfin, chief economist at KPMG UK, said the rise in inflation was a sign of things to come. “While inflation may ease slightly in September, it is expected to remain elevated,” she said. “Recruitment difficulties, cost pressures for businesses, supply chain issues and structural changes post-Covid are all pointing to higher inflation until at least the end of this year.”