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Prices in Britain rose to 2.5% in June, exceeding expectations and further pressure the Bank of England to drive higher inflation.
The increase was common last month, the Office for National Statistics said, challenging the BoE’s view that any increase in inflation by more than 2% could be “temporary”.
The third consecutive month higher than inflation estimates – which rose from 0.4% in February – indicates that businesses have rescheduled the rest of the coronavirus with the aim of achieving economic stability.
Economists expect inflation to rise from 2.1% in May to 2.2%. The ONS said a sharp increase in consumer prices was based mainly on sales and operations, with prices jumping 0.5% in June alone.
Jonathan Athow, deputy director of the ONS national statistics agency, said: “These increases were widespread, for example due to rising food prices and traffic congestion where there are reports of high demand for people.”
Compared to rising consumer prices, UK inflation rose sharply in June from August 2018.
With the BoE predicting that inflation will rise by almost 3% later in 2021, quarterly inflation in the second quarter will be followed by many more in the spring when low rents for temporary hospitality are eliminated.
This adds to the BoE’s perception that inflation is temporary.
Paul Dales, a UK economist at Capital Economics, says the rise in prices is much higher than it would have been had it returned to normal after the epidemic. This, he said, “means that inflation is also happening”.
Rising prices are expected to grow by 4% by the end of the year, the Dales added, but also agreed that inflation should be lower in 2022, allowing the BoE to continue spending more steadily in a time of crisis.
The second car prices were selected by the ONS as inflation operators this year, as in the US, by buyers who want the cars to be used as alternatives to new ones, while car manufacturing was strongly influenced by shortage of semiconductors worldwide.
The ONS says inflation is hampered by a number of factors, such as rising petrol prices, linked to higher prices and rising prices after a temporary decline in prices.
While many economists think the BoE will reduce inflation, James Sproule, chief financial officer at Handelsbanken in the UK, said the BoE Finance Committee should consider how it has reduced inflation this year.
“It is important to remember that as early as February this year, inflation was 0.4% year-on-year and there were interest rates – all ended and forgotten,” Sproule said, adding that there was a need for MPC to significantly raise prices.
“The launch of the cost-cutting program should be considered this winter and that various views on the MPC should be maintained,” he added.
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