Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON
News: Latest News
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance Pro.CalendarSectors 
All NewsEconomyCurrencies & ForexEconomic EventsCryptocurrenciesCybersecurityPress Releases

UK inflation hits 2.1%, vaults past Bank of England target

06/16/2021 | 05:53am EDT
Woman in a protective mask is seen at Andreas Grocery store, in London

LONDON (Reuters) - British inflation unexpectedly jumped above the Bank of England's target in May when it hit 2.1%, part of a post-lockdown climb in prices that is expected gather pace.

The acceleration of the consumer price index from April's 1.5% largely reflected how weak inflation was in May 2020 when the economy was reeling from its first tight lockdown.

The figure represented the first time inflation has gone above the BoE's 2% target in almost two years and was above all 33 forecasts in a Reuters poll of economists which had pointed to a rise in inflation to 1.8%.

Yields on British government bonds rose early on Wednesday with the yield on two-year gilts - which are sensitive to speculation about BoE policy moves - briefly touching their highest in nearly a month.

Investors around the world are assessing the risks of a sustained jump in prices, especially in the United States where annual inflation hit 5.0% in May, the highest in almost 13 years, and where President Joe Biden has proposed a $6 trillion stimulus package.

"Whether the upside news proves temporary or persistent, it is clearly a hawkish surprise," HSBC economist Chris Hare said.

"Of course, some major uncertainties, such as the end of the furlough scheme in September, remain. But if the upside surprises continue, calls for a rate rise on the Monetary Policy Committee may grow louder."

The CPI data showed fuel prices in May were almost 18% higher than a year earlier while clothing and footwear costs rose by 2.1% as people, emerging from their lockdown isolation, bought new outfits.

The price data was collected on or around May 11, before pubs and restaurants were allowed to serve customers indoors and cinemas and hotels reopened from May 17.

The BoE has said it expects inflation to hit 2.5% by the end of this year before settling back to its 2% target as the impact of post-lockdown energy price rises fades along with other cost pressures, such as bottlenecks in supply chains.

Previous surges in inflation since the 2008 financial crisis proved temporary, as the labour market was too weak to create the type of wage-price spirals which occurred in the 1970s.

The central bank is expected to leave policy unchanged on June 24 after its latest meeting.

SIX-MONTH SURGE

Jack Leslie, an economist at the Resolution Foundation think tank, said the speeding up of price growth from 0.3% in November to 2.1% in May represented the fastest six-month rise since sterling collapsed after the 2008-09 financial crisis.

"But UK inflationary pressures are different - and nowhere as near as large - as those causing fierce debate in the U.S.," Leslie said.

Sterling rose slightly after the ONS figures.

Core inflation, which excludes the price of food, energy and other volatile items, rose to 2.0% in the 12 months to May from 1.3% in April, the Office for National Statistics said.

While BoE Governor Andrew Bailey and most of his colleagues say the climb in inflation will be temporary, Chief Economist Andy Haldane said last week the central bank faced the "most dangerous moment" since the European Exchange Rate Mechanism crisis in 1992.

There were signs of further price pressure ahead in Wednesday's data.

Prices paid by manufacturers for their inputs rose by 10.7% in the 12 months to May, the highest since September 2011, and the prices they charged rose by 4.6%, the biggest increase since January 2012.

House prices in April were 8.9% higher than a year before, slowing from a 9.9% rise in March which was the strongest increase since 2007. The ONS said April's dip reflected a rush of sales in March when buyers had been expecting the expiry of a cut in stamp duty which has since been extended.

(Reporting by William Schomberg and David Milliken; editing by Giles Elgood)

By William Schomberg and David Milliken


ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / BRITISH POUND (AUD/GBP) -0.73% 0.5296 Delayed Quote.-4.76%
CANADIAN DOLLAR / BRITISH POUND (CAD/GBP) -0.79% 0.572154 Delayed Quote.0.52%
EURO / BRITISH POUND (EUR/GBP) -0.26% 0.8515 Delayed Quote.-4.20%
INDIAN RUPEE / BRITISH POUND (INR/GBP) -0.72% 0.009665 Delayed Quote.-2.53%
US DOLLAR / BRITISH POUND (USD/GBP) -0.39% 0.720409 Delayed Quote.-0.60%
Latest news "Economy & Forex"
03:28pU.s. cdc says 163,312,474 individuals have been fully vaccinated against covid-19 as of july 27 vs 163,173,366 individuals as of july 26
RE
03:28pU.s. cdc says 188,996,475 individuals have received at least one dose of covid-19 vaccine as of july 27 vs 188,729,282 individuals as of july 26
RE
03:28pU.s. cdc says administered 342,607,540 doses of covid-19 vaccine as of july 27 vs 342,212,051 doses administered as of july 26
RE
03:28pU.s. cdc says delivered 395,460,845 doses of covid-19 vaccine as of july 27 vs 394,949,575 doses delivered as of july 26
RE
03:23pInternational investor concerns mount over China's tech rout
RE
03:11pWall St drops as caution rises before big tech earnings, Fed
RE
03:08pOil prices steady as virus spread counters tight supplies
RE
03:05pWall St drops as caution rises before big tech earnings, Fed
RE
03:04pWorld stocks wobble on China, U.S. real yields slip before Fed meet
RE
02:52pEngland to welcome double-vaccinated U.S. and EU tourists -FT
RE
Latest news "Economy & Forex"