According to estimates, the consumer price index in the United Kingdom has risen to 9.4% annually, hitting a new 40-year record high. According to the United Kingdom’s Office for National Statistics, the most important contributors to this rising inflation rate are motor vehicle fuels and food.
In efforts to get inflation under control, the Bank of England has previously implement five consecutive 25 basis point hikes to interest rates, but with inflation continuing to spike Governor Andrew Bailey of the Bank of England has stated that the Monetary Policy Committee might consider a new 50 basis point hike when its August policy meeting occurs. If adopted, this would be the largest single increase in interest rates in the United Kingdom in nearly 30 years.
Even with these efforts at getting inflation under control looming ahead, the worst might be yet to come. Indeed, the Bank of England is already predicting that inflation might peak at about 11% sometime later this year. At the same time this has been going on, real wages in the United Kingdom have failed to keep up with inflation, leading to greater economic pressure of many of the country’s citizens. Even with unions in the United Kingdom stepping up efforts to get pay rises for their workers to counter the surge in cost of living in the country, but time will tell if this proves enough. For businesses, many say they are facing huge cost pressures, with the result that customers are seeing increased prices as a result.
Yet, as we can see by the predictions above by the Bank of England, the worst might be yet to come.