As inflation has fallen from its highest level in decades, central banks have started cutting interest rates. File (representative image) | Photo credit: Reuters
Inflation in Britain has risen to its highest level since March, driven by a rise in fuel prices last month, official figures showed on Wednesday (18 December 2024).
Consumer price inflation rose 2.6% in the year to November, up from 2.3% the month before, according to the Office for National Statistics. The increase, which moved inflation further away from the Bank of England’s target of 2%, was in line with market expectations.
This is the biggest rise since March and the second increase in two months and is likely to reinforce market expectations that the Bank of England will keep its key interest rate unchanged at 4.75% after its policy meeting on Thursday (December 19, 2024).
Rate setters had expected a rise in inflation when the central bank last cut rates in early November as price pressures eased earlier this year – by September, inflation had fallen to the lowest level since April 2021.
Yet inflation in Britain and the rest of the world is much lower than it was a few years ago, partly because central banks dramatically raised borrowing costs from near zero during the coronavirus pandemic, as prices started to rise, first due to the offer. chain problems and then because of the large-scale Russian invasion of Ukraine, which increased energy costs.
As inflation rates have fallen from their highest levels in decades, central banks have begun cutting interest rates, although few if any economists think interest rates will return to the super-low levels seen in the years following the global financial crisis. 2008 continued to exist. 2009.
Recent developments have reduced expectations of rapid cuts by the Bank of England.
Critics have argued that the new Labor government’s first budget in October will lead to higher inflation. The additional government spending announced in the budget will largely be financed through higher corporate taxes and borrowing.
The economists think this splurge, combined with the prospect that companies will absorb the tax increases by raising prices, could push inflation higher than it otherwise would have been.
Published – Dec 18, 2024 2:34 PM IST
