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U.K. inflation now at a 40-year high as food & energy prices shoot up

U.K. inflation now at a 40-year high as food & energy prices shoot up

With the highest rate among the G7 countries, rising food prices last month have driven the inflation level in the U.K. to a 40-year high of 9.1%, highlighting the depth of the cost-of-living crisis.

The Office for National Statistics (ONS) has published historical data showing that May's inflation rate was the highest since March 1982 and that it is likely to get worse. Even the pound, which was one of the poorest performing currencies this year against the US dollar, dropped below USD 1.22, losing 0.6% on the day.

However, some investors fear that Britain faces a risk of both persistently high inflation and recession due to its high energy import costs and ongoing Brexit concerns, which could further impair trade links with the European Union.

According to experts, making decisions about fiscal and monetary policy is particularly difficult since no one can predict how high inflation will go or how long it will last given the unpredictability of the economic outlook. Brexit, which made Britain a more closed economy with adverse long-term effects on productivity and wages, has worsened the cost-of-living damage for households, experts claimed.

Last month, Britain's headline inflation rate was greater than that found in the US, France, Germany, and Italy. The Bank of England predicted last week that inflation will likely stay over 9% for the foreseeable future until peaking at just above 11% in October as regulated home energy prices are scheduled to climb once more.

To account for an increase in commercial energy prices, including a record jump in gas prices, Britain's energy regulator lifted the home energy price cap by 54% as of April 1. The regulator has not ruled out future hikes to the cap during its monthly assessments this year.

Food and non-alcoholic beverage prices have increased by 8.7% in annual terms, the highest increase since March 2009 and the main contributor to annual inflation in that time.

Source Credits:

https://www.straitstimes.com/business/economy/uk-inflation-hits-new-40-year-high-of-91-in-may#:~:text=LONDON%20(REUTERS)%20%2D%20Soaring%20food,cost%2Dof%2Dliving%20crunch

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Rashi Thakkar

Rashi Thakkar

Rashi started her journey in content when she was completing her MBA. Since then, she has helped well-known startups and businesses boost their online presence. Currently Rashi pens downs insightful articles for AlpenHornNews and various other websites, covering an array of sectors from finance and business to technology and healthcare.