AP

UK posts the biggest jump in annual inflation on record

Sep 14, 2021, 2:05 PM | Updated: Sep 15, 2021, 4:15 am

FILE - In this Wednesday, March 11, 2020 file photo, pedestrians wearing face masks walk past the B...

FILE - In this Wednesday, March 11, 2020 file photo, pedestrians wearing face masks walk past the Bank of England in London. The U.K. posted the biggest jump in annual inflation on record last month as global supply shortages and rising wages magnified the scale of price increases after pandemic-related discounts a year ago. (AP Photo/Matt Dunham, File)

(AP Photo/Matt Dunham, File)

LONDON (AP) — Consumer prices in the U.K. rose at their fastest recorded rate during August as global supply shortages and higher wages accentuated the uptick from pandemic-related discounts a year ago, official figures showed Wednesday.

The Office for National Statistics said inflation accelerated to 3.2% in the year through August from 2% the previous month. The scale of the increase month-on-month was the biggest since the CPI measure of inflation was introduced a quarter of a century ago.

The spike takes inflation way above the Bank of England’s target of 2%, and is likely to ratchet pressure on policymakers to soon consider raising interest rates from record lows.

The increase was slightly more than anticipated in financial markets, with most economists predicting a spike to 3%.

Because inflation has risen by more than one percentage point above the Bank of England’s target, its governor, Andrew Bailey, will have to write a letter to Treasury chief Rishi Sunak explaining what’s going on.

Bailey is widely expected to say that much of the increase was due to temporary factors related to the pandemic. Over the past decade, the central bank has tolerated higher-than-target inflation provided it thought the underlying reasons behind the increase were transitory.

After all, restaurant prices were a big reason behind the August spike, as last year the government offered discounts on meals via its Eat Out to Help Out scheme in an attempt to bolster the economy in the wake of the first national lockdown.

Under the program, sitting customers were able to receive a 50% discount on food and non-alcoholic drinks at participating restaurants between Monday and Wednesday up to 10 pounds ($13.50) per person. It was a hugely popular scheme with more than 100 million discounted meals eaten in the U.K.

There were other reasons behind the increase, not least the sharp spike in a raft of energy prices as the global economy recovers from the initial shock of the pandemic. That impact on inflation is being felt around the world.

A pick-up in demand after lockdown restrictions were eased, higher wages, global supply chain issues, a lack of drivers to transport goods and price rises related to Britain’s departure from the European Union also contributed to the uptick.

Economists said inflation is likely to peak at a higher level than previously thought, perhaps beyond 4%, though much will depend on the pandemic’s path over the winter.

As a result, many think the Bank of England could stop its program of asset purchases in financial markets at the end of this year and increase its main interest rate from the record low of 0.1% as soon as the first half of 2022.

“The data seem consistent with the Bank of England’s expectations of some modest tightening in the coming years,” said Debapratim De, senior economist at Deloitte. “If U.K. growth continues as currently forecast, we are likely to see the first rate rise by next summer.”

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

BEVERLY HILLS, CALIFORNIA - FEBRUARY 23: Louis Gossett Jr. attends American Black Film Festival Hon...

Beth Harris, The Associated Press

Louis Gossett Jr., 1st Black man to win supporting actor Oscar, dies at 87

Louis Gossett Jr., the first Black man to win a supporting actor Oscar and an Emmy winner for his role in the seminal TV miniseries “Roots,” has died. He was 87.

37 minutes ago

Image: A cargo ship is stuck under the part of the structure of the Francis Scott Key Bridge after ...

Associated Press

Authorities identify 2 bodies recovered at site of Baltimore bridge collapse

A major bridge in Baltimore snapped and collapsed after a container ship rammed into it early Tuesday, and several vehicles fell into the river below.

2 days ago

Photo: Mountaineer Jim Whittaker has died at 95....

Gene Johnson, The Associated Press

Lou Whittaker, among the most famous American mountaineers, has died at age 95

Lou Whittaker, a legendary American mountaineer who helped lead ascents of Mount Everest, K2 and Denali, has died at age 95.

2 days ago

File photo: Former Sen. Joe Lieberman speaks in Washington on Jan. 18, 2024....

Associated Press

Former Sen. Joe Lieberman, Democrats’ VP pick in 2000, dead at 82

Former U.S. Sen. Joe Lieberman of Connecticut, who nearly won the vice presidency on the Democratic ticket with Al Gore in 2000, has died.

2 days ago

islamic state attack...

Vanessa Gera, The Associated Press

What we know after the Islamic State group claims responsibility for Moscow massacre

The Islamic State group has claimed responsibility for an attack on a suburban Moscow concert hall that killed at least 133 people.

5 days ago

Moscow shooting...

The Associated Press

Russia: 60 dead, 145 injured in concert hall raid; Islamic State group claims responsibility

Assailants burst into a concert hall in Moscow on Friday and sprayed the crowd with gunfire, killing over 60 people, injuring more than 100.

7 days ago

UK posts the biggest jump in annual inflation on record