Displaying items by tag: inflation

The UK's unemployment rate surged unexpectedly to 4.2% in the three months to February, up from 3.9% in January, the highest level in nearly six months. This increase, alongside a slowdown in earnings growth, reflects economic uncertainty affecting the job market. Real wages rose by 2.1% due to falling inflation. Economists suggest these weaker-than-expected employment figures may prompt the Bank of England to consider interest rate cuts as early as June. HMRC data revealed a significant decline in workers on payrolls by 67,000 in March, the largest drop since November 2020. Vacancies also decreased for the 21st consecutive period. While recent output data suggests potential economic growth in the first quarter, the Office for National Statistics (ONS) advises caution in interpreting unemployment rate data due to low survey response rates. There are also concerns over industrial action and increasing inactivity rates. Acting shadow work and pensions secretary Alison McGovern said:  'Tory failure is laid bare by the reality that we are now the only country in the G7 with an employment rate stuck below pre-pandemic levels’. See also

The British Chambers of Commerce (BCC) have reported that nearly half of UK businesses plan to raise prices soon, despite overall inflation pressures easing. Their survey, covering 4,800 firms, found 46% expecting to increase prices, 51% planning to maintain current prices, and only 3% foreseeing a reduction. This pricing trend is linked to economic challenges affecting business investment, which remains sluggish. A significant factor is the higher labour costs, particularly in the hospitality and manufacturing sectors; 77% and 76% of firms respectively cite it as a major influence on pricing decisions. Additionally, the survey indicates a stagnant landscape for business investment. Most firms reported no change in their investments in new equipment and machinery this quarter: only 24% have increased their investment, while 16% noted a decrease.

UK inflation has dropped to 3.4%, the lowest in over two and a half years, potentially signalling a Bank of England (BoE) interest rate cut this summer. This decrease, primarily driven by slower food price increases, may lead to cheaper mortgages, providing relief to homeowners. Initially predicted at 3.5%, the February inflation rate was pleasantly surprising, especially as food inflation fell to 5% from 7% in January. The decline supports Rishi Sunak's commitment to reduce inflation, and aligns with the BoE's target of 2%. This news prompted NatWest to lower mortgage rates even before the BoE's decision. Financial markets expect the BoE to maintain the current 5.25% interest rate, but the reduced inflation increases the likelihood of a summer cut, which could significantly lower mortgage payments. However, renters face contrasting challenges, with rental costs rising at record rates due to market constraints. The average UK rent soared by 9% over the past year. As homeowners anticipate potential financial relief, renters continue to struggle with escalating living expenses.

Inflation in the UK has unexpectedly risen to 4% in the year to December, surpassing economists' predictions of a decrease to 3.8%. This increase from November's 3.9% was primarily driven by higher tobacco and alcohol costs, following a government hike in smoking duties. The latest figures from the Office for National Statistics (ONS) do not yet reflect the full impact of increased shipping costs due to Red Sea diversions, triggered by Houthi attacks on commercial ships and subsequent UK and US airstrikes. These disruptions are expected to significantly raise goods prices into Europe, according to DP World's chief financial officer Yuvraj Narayan.Retail chains have responded by offering more sales.The Bank of England, striving to control inflation, has maintained a base interest rate of 5.25% since August. Core inflation, excluding volatile items like food and energy, remains at 5.1%, with food inflation dropping from 9.2% to 8%.Chancellor Jeremy Hunt acknowledges the uneven path of inflation reduction, emphasising the need for economic stability. Labour's Rachel Reeves and the Liberal Democrats' Sarah Olney highlighted the ongoing strain on families due to rising living costs.

The Bank of England has maintained its interest rate at 5.25% for the third consecutive meeting. This decision reflects the Bank's stance that borrowing costs need to remain high for an extended period to combat inflation, which is still well above the target rate. Unlike the US Federal Reserve, which hinted at potential rate cuts next year, the Bank of England, led by Andrew Bailey, suggests that the UK is not yet in a position to consider such reductions. Bailey expressed that it is too early to speculate about cutting rates, emphasising the need for more progress in controlling inflation. The decision was not unanimous, with three members of the Monetary Policy Committee (MPC) arguing for a rate increase, but they were outnumbered by the six others. Despite faster-than-expected inflation drops and signs of economic weakness, the Bank is cautious about reducing rates too soon, fearing a resurgence in inflation. Bailey noted that while significant progress has been made in reducing inflation from over 10% in January to 4.6% in October, there is still a journey ahead to reach the 2% target.

In October, UK inflation significantly decreased to 4.6% from 6.7%, marking the lowest rate in two years and a major easing of price pressures. This represents the most substantial monthly drop in the annual Consumer Price Index (CPI) rate since April 1992. The Bank of England (BoE) has kept interest rates unchanged at 5.25% and expects a challenging journey to bring inflation down to its 2% target by late 2025. Rishi Sunak acknowledged this as progress towards his goal of halving inflation within the year, bearing in mind the anticipated election in 2024. Chancellor Jeremy Hunt views this as a step toward long-term economic growth. Despite this positive trend, Britain still maintains the highest consumer price growth among G7 nations and has seen a 21% increase in consumer prices since late 2020. The BoE and economists anticipate further interest rate cuts by December 2024.

The Bank of England has declared that the base interest rate will remain at 5.25% for at least another six weeks. The bank’s governor, Andrew Bailey, emphasised that there is ‘no room for complacency’ regarding persistently high inflation, and cautioned against thinking about rate cuts too soon. He now anticipates slightly lower inflation for the rest of the year than previously projected. Critics argue that the bank has acted too cautiously, and that, with upcoming events like the general election and declining political popularity, inflation risks are on the rise. The shadow chancellor, Rachel Reeves, considers the Bank's forecasts a ‘damning indictment’ of economic failures by the Conservative Party, highlighting the need for alternative growth strategies.

In August, high inflation led to increased government finances, creating pressure on Chancellor Jeremy Hunt to boost support for state services, according to the Resolution Foundation. Government borrowing for August was £11.6 billion and nearly £70 billion for the first five months of the current fiscal year. This left the Chancellor £11.4 billion better off for 2023-24 than March's official forecasts had predicted. The Resolution Foundation noted that while higher inflation had led to increased tax payments, it had strained public services with pre-inflation budget allocations, making future public service cuts less tenable. Conservative backbenchers have opposed increasing department budgets in favour of tax cuts, while former prime minister Liz Truss has advocated tax cuts to stimulate economic growth. The borrowing figures highlight the need to manage inflation and government finances.

A Christian economist has urged churches to consider setting up benevolence funds to help members struggling with the cost of living as inflation proves more persistent than expected. Former IMF economist and government debt manager Dr Paul Mills said the step was needed for those on fixed incomes or losing their jobs. He was speaking after an economic advisor to the Chancellor said the Bank of England may need to spark a recession to finally get rising prices under control. The bank's target from the Government is to get inflation down to 2%, but the public has yet to see the pain that is coming through the economy from interest rate rises. On 22 June the base rate increased to 5%, a bigger increase than expected. Dr Mills said it would help to pray for the nation, and for medium- to long-term steps to turn things around.

As food prices soar the government is discussing plans for supermarkets to introduce price caps on basic food like bread and milk to limit the rising cost of living. A voluntary agreement with major retailers could see price reductions but there are no plans for a mandatory price cap. The idea of a freeze on basic food items is said to be at the ‘drawing board stage’. Supermarkets will be allowed to select which items they would cap and only take part in the initiative on a voluntary basis. The rate of inflation can be calculated in various ways, but the main measure is the Consumer Prices Index which tracks the prices of everyday items in an imaginary ‘basket of goods’. Expensive food may overtake energy bills in the cost-of-living crisis. Security tags are being fitted to expensive food, coffee jars are replaced with dummies, and some stores are limiting the number of items on shelves to reduce theft. See