There are many reasons to be amazed by the latest inflation rates.
A consumer price index, which measures the cost of a typical “shopping basket” for goods and services. Jumped From 2% in July to 3.2% in August.
Not only did this reach its highest level in almost 10 years, but the month-on-month change from July to August has been the largest increase since the CPI was introduced as a price index in 1997.
In other words, this is a big one.
But does that mean inflation is higher than ever?
Given the inflationary spiral of rising prices more than ever, this problem is not an easy task. This is one of the major concerns for all economists.
High inflation was responsible for economic instability and high unemployment in the 1970s, a test that took years, if not decades, to recover.
As in many cases of economics, it is possible to discuss both here.
On the other hand, much of the upward price pressure at this point is a function of what happened last year rather than what is happening now.
During this time last year, the cost of going out for lunch at restaurants across the UK dropped very sharply due to the Prime Minister’s Eat Out to Help Out scheme.
A year later, restaurant prices are no longer discounted, so there’s what economists call the “basic effect” of pushing up the inflation index.
If all this had happened, we could be confident that inflation would eventually subside.
Indeed, it could be the broad message we will receive in the coming weeks from Bank of England Governor Andrew Bailey. Monetary Policy Committee’s 2% target.
He has consistently argued that many of the inflationary effects are temporary, and that inflation will rise further, but will weaken next year.
But the problem is that inflation continues to rise faster than the Bank’s forecasts suggest, even though the Bank has repeated this debate most of the year.
Not long ago, it was predicted that prices would not exceed 3% this year.
Now it seems that the CPI index will reach 4% before the beginning of the year.
And if you look at the “shopping carts” of goods and services in different categories, there is plenty of evidence that prices are rising.
For most raw materials such as copper and steel, wood and wood, cement and stone, food and beverages, prices appear to be rising much faster than usual.
And there is energy.
Over the past few months, wholesale energy prices have risen gradually and sharply not only in the United Kingdom but throughout Europe.
Last week’s electricity bill Soared To the highest level on record.
There are many reasons for this. Among them are lack of gas in the North Sea and lower than normal wind speeds.
However, as a result, we are facing a sharp increase in both electricity and gas prices in the coming months.
Again, it can be argued that this is all temporary and will soon drop out of inflation data after a year or so high.
However, inflation can be anxiously “sticky”.
If prices are high for a long period of time, they tend to remain high.
Andy Haldane warned that he was worried that “a nasty surprise” would come when he saw the prices of the economy as a whole, just before he resigned as Chief Economist of the World Bank earlier this year.
These words could reverberate on Thread Needle Street and beyond in the coming months.
Is inflation soaring for a moment? Or can consumers face “troublesome surprises”? | Business news
Source link Is inflation soaring for a moment? Or can consumers face “troublesome surprises”? | Business news