UK inflation jumps to 10.4% amid more interest rate hikes by BoE
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Wednesday's data comes exactly a week after the British government predicted inflation to slow sharply to 2.9% by the end of the year, with the UK supposedly able to avert recession.
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Protestors demonstrating against the cost of living in London, England on April 2, 2022 (AP)
This month, despite attempts by the British central bank to dial down the evergrowing cost-of-living crisis, official data showed on Wednesday that annual inflation hiked back up.
According to the Office for National Statistics (ONS), in the past 12 months leading up to February, the Consumer Prices Index (CPI) jumped by 10.4% from 10.1% a month prior in January. That led to price increases for food and drinks but was offset partially by the decrease of motor fuel costs.
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ONS chief economist Grant Fitzner explained that "inflation ticked up in February, mainly driven by rising alcohol prices in pubs and restaurants following discounting in January," adding that food and drinks reached their highest rate in more than 45 years "with particular increases for... vegetable items as high energy costs and bad weather across parts of Europe led to shortages and rationing."
Forecasts from the bank predict that the UK will be enduring 40-year-high inflation, reaching 11% during the incumbent quarter. However, Britain has already entered a recession that may last up to 2 years - even longer than what it endured during the 2008-09 financial crisis.
Decisions, decisions
Wednesday's data comes exactly a week after the British government predicted inflation to slow sharply to 2.9% by the end of the year, with the UK supposedly able to avoid recession, alongside finance minister Jeremy Hunt's £94 billion ($114 billion) cost-of-living decisions for this year.
"We need to stick to our plan to halve it this year," Hunt stated on Wednesday in response, adding, "We recognize just how tough things are for families across the country, so as we work towards getting inflation under control we will help families with cost of living support."
The BoE's main duty is to maintain inflation levels close and not over 2%, and it is due to reveal its plan on monetary policy tomorrow on Thursday, also taking into consideration last week's Credit Suisse failure and UBS buyout alongside the Silicon Valley Bank (SVB) crash in the US, which is already impacting economies everywhere.
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Since the onset of the energy crisis, the central bank has been printing excessive amounts of money, which has been causing much of the inflation and created the cost of living crisis. On February 2, the Bank of England Monetary Policy Committee announced that it would increase the interest rate to 4% from 3.5%.
While the Bank of England may not possess the same capacity as the US Federal Reserve to print as much money without worrying about debt or interest payments, the UK can still manage to buy some time to recalibrate its policies and solve the structural problems.
