Inflation in United Kingdom
United Kingdom - Inflation
Inflation decreases in August but remains elevated
Inflation dropped to 9.9% in August from July’s 10.1%. The reading was driven by moderating price pressures for transport; recreation and culture; and restaurants and hotels.
Annual average inflation rose to 7.0% in August (July: 6.5%). Meanwhile, core inflation rose to 6.3% from July's 6.2%.
Finally, consumer prices increased 0.50% over the previous month in August, a smaller increase than the 0.61% rise recorded in July. August's result marked the weakest reading since January.
Looking ahead, Prime Minister Liz Truss’ recent announcement that energy bills will be frozen for both firms and households should cause headline inflation to peak at slightly over 10% in Q4, lower than previously expected. For households, energy bills which were due to rise to around GBP 3,500 from October will now be capped at GBP 2,500 for two years. However, the measures are likely to stoke demand and thus boost price pressures in other areas of the economy.
On Truss’ announcement, analysts at Goldman Sachs said:
We now look for headline inflation to peak at 10.9% in October, significantly lower and earlier than our previous peak of 14.8% in January. […] The rapid deceleration out of double-digit inflation under the energy bill freeze is likely to guard against risks of inflation expectations de-anchoring.[…] At the same time, we expect the expansionary nature of the fiscal intervention to result in higher core inflation and wage growth.”
FocusEconomics Consensus Forecast panelists expect inflation to average 9.1% in 2022, which is up 0.6 percentage points from last month’s forecast, and 6.3% in 2023.
United Kingdom - Inflation Data
|Inflation Rate (CPI, annual variation in %)||0.0||0.7||2.7||2.5||1.8|
5 years of economic forecasts for more than 30 economic indicators.
United Kingdom Inflation Chart
Source: Office for National Statistics (ONS).
United Kingdom Facts
|Bond Yield||0.83||-3.04 %||Jan 01|
|Exchange Rate||1.33||-0.35 %||Jan 01|
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September 22, 2022
On 22 September, the Bank of England (BoE) increased the bank rate from 1.75% to 2.25%, marking the seventh successive rate hike.
September 14, 2022
Inflation dropped to 9.9% in August from July’s 10.1%.
September 12, 2022
GDP expanded 0.2% in month-on-month seasonally-adjusted terms in July, which contrasted June's 0.6% decrease but undershot market expectations of 0.4% growth.
August 23, 2022
Liz Truss is the favorite to become Prime Minister in September, and promises tax cuts. The cost-of-living crisis is likely to force the next PM into greater fiscal handouts to vulnerable households. Relations with the EU will likely stay tense. What’s happening: The result of the Conservative Party leadership election between former Chancellor Rishi Sunak and Foreign Secretary Liz Truss will be announced on 5 September.
August 23, 2022
The S&P Global/CIPS Flash Composite Purchasing Managers’ Index (PMI) came in at 50.9 in August, down from July's 52.1.