UK inflation eases, remains close to 40-year high

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Published: Wed 14 Dec 2022, 4:12 PM

Last updated: Wed 14 Dec 2022, 5:31 PM

UK inflation remained close to a 40-year high in November, piling pressure on employers to boost wages as the nation faces a wave of strikes and economists expect the Bank of England to approve a ninth consecutive interest rate increase on Thursday.


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While annual consumer price inflation dipped to 10.7 per cent in November from 11.1 per cent the previous month, inflation remains at levels last seen in the 1970s and early 1980s, the Office for National Statistics said Wednesday.

The figures offer little relief for consumers as the high cost of food and energy erodes spending power. Food price inflation accelerated for a 16th straight month in November, with prices rising 16.5 per cent from a year earlier, the ONS said.

The inflation report came on a day when people across Britain struggled to get to work and mail wasn’t delivered due to strikes by rail and postal workers demanding higher pay. Nurses in England, Wales and Northern Ireland are set to hold the first of two one-day strikes on Thursday, with ambulance crews and border officials scheduled to strike later this month.

Inflation remains stubbornly high across Europe, which has been hard hit by a jump in the price of natural gas — used to generate electricity, heat homes and fuel industry — following Russia’s invasion of Ukraine. That contrasts with the US, where the inflation rate dropped to 7.1 per cent in November from a peak of 9.1 per cent in June.

British officials said it was too soon to say whether inflation had peaked in the UK. “Some may be calling this a peak; it is, I think, too early,” Grant Fitzner, chief economist for the ONS told the BBC. “We’ve only seen one fall from a 40-year high, so let’s wait a few months.”

The figures will be watched closely by Bank of England policymakers, who are meeting ahead of an interest rate decision on Thursday.

Economists expect the bank to raise its key rate by half a percentage point to 3.5 per cent this week. That would be the ninth consecutive rate increase since December of last year, when the rate stood at 0.1 per cent.

The central bank last month forecast that inflation would peak at around 11 per cent this year before beginning to slow early next year. The bank expects inflation to drop below its 2 per cent target within two years.

But the bank also cautioned that those projections were uncertain, primarily due to volatility in energy prices.

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