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If it’s true that the miser loves company, then American consumers battling the highest rate of inflation in four decades can take solace in sympathizing with their friends in the UK, which is in the midst of a similar price spike.
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UK inflation hit a 40-year high of 9% in April for many of the same reasons US inflation rose to 8.3% in the same month – a sharp spike in oil prices. food and energy. Month-on-month, consumer prices in the UK rose 2.5%, CNBC reported. That was just below the 2.6% increase predicted by a Reuters poll of economists.
The UK’s 9% annual inflation rate is the highest since modern records began in 1989 – the previous record was 8.4% in March 1992 – and is well above the 7% increase of the previous month.
Britons had braced for a price spike in April following a reset of the government’s cap on household gas and electricity bills, The New York Times reported. The cap, which is designed to protect around 22 million households from unaffordable heat and power, soared 54% amid soaring wholesale natural gas prices at the end of 2021. Ofgem, the regulator of the UK energy, did not rule out further increases. on the ceiling this year.
Meanwhile, food prices have gotten so high that around a quarter of Britons have decided to skip meals, according to a recent Ipsos survey conducted on behalf of Sky News. Bank of England Governor Andrew Bailey called the outlook for consumers “doomsday”.
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In an attempt to contain inflation, the UK’s central bank adopted a tactic similar to that of the US Federal Reserve. The Bank of England has raised interest rates in four consecutive meetings, from a historic low of 0.1% in the COVID era to a 13-year high of 1%.
But while the inflation rate in the United States slowed in April compared to the previous month, inflation in the United Kingdom went in the other direction.
“Unlike the US, inflation in the UK continues to rise at the moment, fueling further fears about the cost of living,” wrote Richard Carter, head of fixed rate research at Quilter Cheviot. , in a research note. “It will also add to the pressure on the Bank of England to raise interest rates and tackle soaring prices although, as they themselves admit, there are many factors at play. origin of inflation are beyond their control.”
In another similarity to the United States, the rapid rise in prices in the United Kingdom comes during a period of historically low unemployment. Many workers across the Atlantic — like those here in the United States — are asking for raises to deal with rising consumer prices. This creates a delicate situation for the Bank of England
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“The risk is that it should [the Bank of England] raising interest rates too quickly at a time when consumers are already feeling the pinch, this could then reduce demand and push the economy into recession,” said Ambrose Crofton, global market strategist at JPMorgan Asset Management, in a rating. “Doing too little, however, risks raising inflation expectations and causing a more persistent wage-price feedback loop.”
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