- UK inflation rose to reach its fastest pace in nine years in August, hitting 3.2% year-on-year.
- The Office for National Statistics said gains in food, restaurant and transport prices were key factors.
- Economies around the world are dealing with strong inflation, putting pressure on central banks.
- See more stories on Insider’s business page.
UK inflation hit a nine-year high in August as the economy reopened, with food and fuel prices climbing sharply, the country’s Office for National Statistics said Wednesday.
Year-on-year consumer price index inflation came in at 3.2% in August, the fastest rate since March 2012, after slowing to 2% in July. Economists had been expecting a rise to 2.9%, according to Bloomberg data.
Month-on-month, CPI inflation came in at 0.7% in August after flatlining in July, the ONS said. Economists had been expecting a rate of 0.5%.
The ONS said gains in prices of food, restaurants and hotels, and transport contributed to the jump. It said rising fuel prices were the main factor pushing up transport costs.
However, it urged caution in reading too much into August’s numbers. The statistics body said a factor pushing up year-on-year inflation was the fact that food prices fell sharply in August 2020, the comparative month, as a result of the government’s “eat out to help out” meal subsidy scheme.
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Inflation has surged in the UK and other advanced economies in recent months as growth has bounced back after the lifting of coronavirus restrictions.
The Bank of England has predicted that inflation will rise as high as 4% before the end of the year. But, along with the US and Eurozone’s central banks, it thinks the price rises will prove transitory and expects inflation to fall back to its 2% target by 2023.
Yet Paul Dales, chief UK economist at Capital Economics, said August’s figure may well be the first step to inflation shooting up to 4.5%. He said higher energy prices are likely to push up the figure further than the Bank of England thinks.
But he added: “Inflation will fall sharply next year as a lot of these upward influences unwind. By the end of 2022, it may be below 2.0% again.”
Dales said the next few months will be an “uncomfortable period” for the BOE but said it is unlikely to raise interest rates from their current record-low level of 0.1% until 2023.
The UK data came a day after figures showed that US CPI inflation cooled to 5.3% in August from a 13-year high of 5.4% in July. Month-on-month, US inflation slowed to 0.3% from 0.5% a month earlier.