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September 15, 2021

Run out of BOE! UK Inflation Makes Things Again

 UK inflation jumped stronger than expected to a 9 -year high in August, adding pressure on the Bank of England (BOE) to change its monetary policy.


Consumer prices rose 3.2% year -on -year last month, the highest figure ever recorded since March 2012 after slipping back to the central bank’s 2% target level in July, and also exceeding expectations for a 2.9% rise. This is also the largest increase since records began in January 1997.


A report released by the National Statistics Office (ONS) also showed core inflation excluding food and energy prices rose 3.1%, also better than the market forecast to rise 2.9%.



These figures add to the evidence that the reopening of sanctions measures has led to rising costs of raw materials and labor, thus carrying the threat of the economy to ‘overheat’.


‘Overheated economy’ is an economy that is growing at an unsustainable rate. The two main signs of an ‘overheated’ economy are rising inflation and unemployment rates that are below normal levels for the economy.


The UK unemployment rate fell to 4.6%, according to data released on Tuesday. However, this consolidation may not last as the employment subsidy program by the government will be terminated by the end of this month.


The pound rebounded following this encouraging data reading, trading at 1.38200 against the USD.