Friday, November 26

ROUNDUP: UK inflation jumps to ten-year high

LONDON (dpa-AFX) – Inflation in Great Britain continues to rise rapidly and makes a monetary policy reaction by the Bank of England more likely. In October the cost of living rose by 4.2 percent compared to the same month last year, as the ONS statistics office announced in London on Wednesday. This is the biggest price hike in ten years. In September the rate of price increase was 3.1 percent.

Analysts had expected higher inflation, but only expected an average inflation rate of 3.9 percent. In a month-on-month comparison, consumer prices rose by 1.1 percent. Price increases came primarily from housing costs and household-related services. Transport services and visits to restaurants and hotels were also more expensive. At the same time, the statisticians pointed out the great importance of base effects, as prices fell sharply in the first Corona waves a year ago. The price increases now appear correspondingly clear.

According to experts, a timely interest rate hike by the British central bank with the price jump will move into the realm of the possible. Together with the solid development of the labor market, the high inflation speak in favor of a rate hike by the Bank of England in December, said Paul Dales, chief economist for Great Britain at the analysis house Capital Economics. The central bank had already indicated a first interest rate hike since the Corona crisis for the most recent meeting, but ultimately did not act. That had earned her some fierce criticism from observers.

An important aspect for the central bank is the question of how the labor market will develop after the end of the government’s corona aid (Furlough Scheme). The first figures after the end of the program in September indicated the day before that it would be largely problem-free. It is questionable, however, whether this development will continue – or whether many of the short-time workers who were once on leave are pushing their way onto the labor market, causing unemployment to rise, at least temporarily. This rather speaks against higher key interest rates, which can inhibit economic development./bgf/jha

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