UK inflation rate reaches 40-year high of 9.1 per cent

The inflation rate was pushed to a new high of 40 years, the nation’s statistics office said on Wednesday, due to rising food prices in particular. In Britain, a cost-of-living crisis has intensified because wage growth has not kept pace with rising prices. Pandemic-related disruptions of supply chain and the war in Ukraine have caused the price of essential items such as food and fuel to shoot up, and squeeze the budgets of households. In May, bread, cereals and meat prices were 10 percent higher than a year earlier, according to the Office for National Statistics.

Britons are still facing many more months of rapidly rising prices. Inflation is not expected to reach a peak until it reaches 11 percent in October, when a price ceiling on household electricity and gas bills rebounds. This month, the Organization for Economic Co-operation and Development forecasts British inflation averaging 8.8 percent this year, compared with about 7 percent in the United States and the eurozone.

In an effort to lower inflation, the Bank of England has raised interest rates to 1.25 per cent, the highest since 2009. Last week, the central bank said it was “trading strongly” against sustained inflationary pressures. Policymakers have expressed concern that above-average price increases are spreading to more goods and services, proving that inflation is no longer imported into the country solely through energy and commodity prices.

Instead, it seems that inflation is increasingly being driven by companies raising their prices to cover their own costs and wages, and paying bonuses to lure workers into a tight labor market. Prices of goods sold by British manufacturers, known as inflation for production prices, rose by 15.7 per cent in May from a year earlier, the highest profit since 1977, largely due to an increase in food prices, the Bureau of Statistics said on Wednesday .

The squeeze on income has forced the government to provide assistance to households with direct payments and reduced energy bills. But with average wages, once adjusted for inflation, most falling in more than a decade, the government faces the prospect of a summer of strikes as workers in a variety of industries, including teachers and workers of the national health service, threaten to leave work. Next week, defense lawyers will strike over cuts to legal aid.

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