U.K. Inflation Hits 10-Year High, Stirring Expectations of Rate Rise
For the first time in a decade, annual inflation in the UK has accelerated to its fastest, strengthening expectations that the Bank of England (BOE) will be the first major bank to lift interest rates from pandemic lows. Concerns over global inflation have intensified due to the Covid-19 crisis, and although many major economies have recovered, there are still signs of financial struggles across the globe. According to the UK’s Office for National Statistics, consumer prices increased 4.2% year-on-year in October, following a 3.1% rise in September. This marks the fastest rate of inflation since December 2011 and represents more than twice the BOE’s 2% inflation target. Economists and investors believe that the BOE could act on the issue as soon as next month.
If the BOE were to act, the entity would move in front of the US Federal Reserve and the European Central bank in the process of withdrawing stimulus from recovering economies. Another concerning factor is the recent supply-chain issue that threatens growth. According to the CME Group, a rate rise in December is a near-certainty due to the current economic landscape. The uptick in price growth was higher than the 4.0% rate predicted by economists polled by the Wall Street Journal earlier this year. The inflation has largely been caused by a surge in energy and fuel prices, however, there were signs that the higher costs were due to persistent issues in global supply chains. Inflation is picking up across the globe as consumer price inflation in the US reached 6.2% in October.