UK inflation reaches five-year high at 3 per cent

Bank of England Governor hints at possible interest rate hike

Just a month after the Bank of England suggested a hike in UK interest rates “over the coming months” to curb inflation, latest figures show that Inflation in Britain has hit a five-year high of 3 per cent in September, in the latest sign that consumers are becoming increasingly squeezed.

The Consumer Price Index (CPI) rose from 2.9 per cent in August, its highest since April 2012, while the CPIH, which factors in housing costs, rose to 2.8 per cent, from 2.7 per cent in August, the Office for National Statistics stated today.

Wages rose at an annual rate of 2.1 per cent in the three months to July, meaning workers are seeing the value of their pay packets decrease in real terms.

Inflation has reportedly risen sharply since the Brexit vote in June last year as the value of the pound has fallen against other major currencies, causing the prices of imports to rise.

Meanwhile, the pound went down around 0.5 per cent today, partly after the comments of Bank of England governor Mark Carney who warned that inflation “will peak” in next couple of months and would probably rise further.

Carney provided a further hint that the Bank was ready to raise interest rates soon when he told the Treasury Select Committee today: “Having used up more spare capacity, having seen some evidence of building domestic pressures, the judgment of the majority of the committee is some raise in interest rates over the coming months may be appropriate,” Carney told lawmakers today.

The governor further warned that a ‘no deal’ Brexit would have a negative impact on the economy, while stating that businesses are ‘less confident about a smooth transition’.

 

 

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