UK inflation exceeds Bank of England target to 2.1%
LONDON, June 15 (Reuters) – British inflation unexpectedly exceeded the Bank of England’s 2.0% target in May when it hit 2.1% and is expected to rise further as the country reopens its economy after coronavirus lockdowns.
The rise in price growth from 1.5% in April is largely due to the comparison with the prices of May 2020, when the country was in its first strict shutdown, especially for clothing, the fuel, games and take out.
A Reuters poll of economists had indicated a rise in inflation to 1.8%.
Investors around the world are weighing the risks of a sustained rise in inflation, especially in the United States where annual inflation reached 5.0% in May, the highest in nearly 13 years, and where the US President Joe Biden has proposed a $ 6 trillion stimulus package.
Jack Leslie, an economist with the Resolution Foundation think tank, said the acceleration in price growth from 0.3% in November to 2.1% in May was the fastest six-month increase since the collapse of the pound sterling after the 2008-09 financial crisis.
“But inflationary pressures in the UK are different – and nowhere near as great – than those that are causing fierce debate in the US,” Leslie said.
Sterling was little changed by the ONS figures.
The BoE has said it expects inflation to hit 2.5% by the end of this year as the economy reopens after its coronavirus lockdowns and global oil prices rise.
Core inflation, which excludes the price of food, energy and other volatile items, reached 2.0% in the 12 months leading up to May, the Office for National Statistics said.
Governor Andrew Bailey and most of his colleagues say the rise in inflation will be temporary and does not require the central bank to cut back on its massive stimulus packages. He is expected to leave his policy unchanged on June 24 after his last meeting.
But chief economist Andy Haldane said last week that BoE policymakers face the “most dangerous moment” since 1992, when the government withdrew the pound sterling from the European exchange rate mechanism, the precursor to the ‘euro.
There were signs of further price pressure coming in Wednesday’s data.
Prices paid by manufacturers for their inputs rose 10.7% in the 12 months to May, the highest since September 2011, and the prices they charged rose 4.6%, the largest increase since January 2012.
Reporting by William Schomberg and David Milliken; edited by Alistair Smout
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