Pound jumps as inflation surges to 2.3%

Mar 22, 2017, 00:22
Pound jumps as inflation surges to 2.3%

Figures from the Office for National Statistics (ONS) showed food was becoming more expensive again - up 0.3% on the same month a year ago - after 31 months in a row of deflation amid a supermarket price war.

United Kingdom inflation hit its highest level since September 2013 in February, with food prices recording their first annual increase for over two years.

United Kingdom inflation exceeded the Bank of England's 2 percent target in February for the first time since 2013, on weak pound and rising oil prices. The central bank could now come under pressure to hike interest rates from their current ultra-low levels.

Ruth Gregory, UK economist at Capital Economics, says the economy is being affected by the import price shock much sooner than the MPC expected.

It is also more bad news for consumers who have already seen their purse strings squeezed with rising prices and stagnating wages.

Overall food prices lifted 0.8% between January and February, in contrast to a smaller rise of 0.1% a year earlier, after shock weather conditions in southern Europe ravaged crops and left supermarkets and restaurants grappling with a vegetable shortage. The result of the Brexit vote left investors anxious, and triggered a slip in the value of the pound.

But James Smith, economist at ING, said the Bank was likely to hold fire on rate rises due to subdued wage growth, now equal to inflation following today's data.

Core CPI rate (excluding energy, food, alcohol and tobacco) also surged, reaching 2.0 percent in February from 1.6 percent in January, again exceeding consensus forecast. Fuel prices rose by 1.2 percent between January and February. From this month, the ONS is including extended commentary on CPIH in its CPI releases, as it believes the reading is a more accurate gauge of price changes.

"UK inflation grew to 2.3 percent, well above the target fixed by the Bank of England".

"Meanwhile inflation at 2.3% is now higher than the growth in average earnings (2.2%), meaning real pay is officially shrinking". It is only when rising prices become entrenched that markets start to be concerned'. According to the Resolution Foundation's analysis of the ONS' data, more than 1% of this increase can be put down to rising transport costs.

Inflation has broken through the Bank of England's (BoE) 2 per cent inflation target following the largest month-on-month rise since October 2012.

The Bank's monetary policy committee (MPC), under the governor Mark Carney, has said it is happy to let inflation rise some way above its target as it balances the need to support growth and jobs with keeping price rises in check.

The pound jumped following the inflation announcement, rising 0.8% against the USA dollar to 1.246.

But the rise in inflation, even if temporary, also brings dangers for that recovery.

YOU MIGHT ALSO LIKE
  • NCAA Denounces Confederate Flag, Does Nothing

    NCAA Denounces Confederate Flag, Does Nothing

    Protesters flew a large Confederate flag atop a parking garage just feet from a SC arena hosting NCAA Tournament games on Sunday. The NCAA does not host championship events in MS due to the prominence of the Confederate flag in the MS state flag.

    GOP congressman to Trump: Apologize for wiretap claim

    The Republican president offered no evidence for the allegation, which an Obama spokesman has said was "simply false". Charlie Dent, R-Pa., called the accusation against Britain "inexplicable" and the accusation against Obama unfounded.
    Dybala: Juve on par with Europe's elite

    Dybala: Juve on par with Europe's elite

    Juventus coach Massimiliano Allegri was not entirely satisfied. "The result isn't everything". After losing to Juventus, Porto won its next three league games by a combined score of 12-0.
  • Champions League Q-finals: Bayern face Madrid, Barca battle Juve

    Champions League Q-finals: Bayern face Madrid, Barca battle Juve

    Ben Gladwell reports on Serie A, the Italian national team and the Bundesliga for ESPN FC, UEFA and the Press Association. In these kinds of matches it doesn't matter where you're playing.
    Tories could face election fraud cases across country

    Tories could face election fraud cases across country

    Officers are looking into whether strict spending limits in key seats were breached during the Tory "battle bus" campaign. A 12th force - Staffordshire - said it had also passed a file to the CPS.

    Netanyahu to seek OK for new settlement from visiting Trump's envoy

    Alternatively, Trump may invite Abbas and Netanyahu to the White House, to announce the resumption of direct talks. Haley also stressed on the need for a peace deal directly negotiated by the Palestinians and Israel.
  • Middlesbrough vs Man Utd Premier League live score updates

    Middlesbrough vs Man Utd Premier League live score updates

    Although he has been close to Gibson for years, their conversation following Karanka's exit proved brief. He's a talented footballer. "I've known Steve a long time.

    Trump says has won over skeptical Republicans Obamacare overhaul

    In his weekly press conference, House Speaker Paul Ryan also indicated he was open to fixes to the bill. Mark Meadows, R-N.C., who leads the hard-line House Freedom Caucus.

    Samsung plotting 'ultra-premium' foldable smartphone for 2018?

    Samsung has already shown the foldable screen technology that has four different modes - rollable, bent, curved, and foldable . The report also says that Chinese companies are also very interesting in pursuing the foldable smartphone niche.
  • Cholesterol-Slashing Drug Does Not Harm Brain

    Cholesterol-Slashing Drug Does Not Harm Brain

    But it comes at a hefty price tag of more than $14,000 per year, raising concerns about how many patients could benefit. Study participants were ages 40 to 85 and already taking statins; most already had suffered a heart attack or stroke.
    Trump plan to defund the arts could hit video game educational programs

    Trump plan to defund the arts could hit video game educational programs

    About 100,000 students a day attend Beyond the Bell programs , said Alvaro Cortes, the executive director of the program. Money from the NEA and NEH finds its way to Wisconsin to help fuel the state's arts scene and enrich its cultural life.
    Vehicle  crashes into Seattle gas station

    Vehicle crashes into Seattle gas station

    Meanwhile, if you're looking for a gas station attendant in Seattle, we can think of one or two who are now in need of a new job. Another would be that the driver drove the SUV straight into a gas pump while cruising at a rather high rate of speed.
popular