Tue, 19 Oct 2021

LONDON, England: August saw inflation rates in the U.K. soaring to the highest-ever recorded rate, official figures show.

Inflation rose to 3.2 percent in the year through August from last month's 2 percent, according to the Office for National Statistics.

Because inflation has risen by more than one percentage point above the Bank of England's target of 2 percent, its governor, Andrew Bailey, is required to write to Treasury chief Rishi Sunak to offer an explanation.

Bailey is expected to attribute most of the increase to temporary factors related to the pandemic.

The August spike was mainly caused by restaurant prices, as the government offered discounts on meals via its Eat Out to Help Out scheme last year to bolster the economy during the first national lockdown.

Under the program, sitting customers received a 50 percent discount on food and non-alcoholic drinks, up to $13.50.

The other reasons behind the increase were the sharp spike in 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.

According to economists, inflation could peak at a higher level than previously thought, perhaps beyond 4 percent, though it will depend on the pandemic's development over the winter.

As a result, 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 percent 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, as quoted by Associated Press. "If U.K. growth continues as currently forecast, we are likely to see the first rate rise by next summer."

More Cleveland News

Access More

Sign up for Cleveland News

a daily newsletter full of things to discuss over drinks.and the great thing is that it's on the house!