UK inflation rate jumps to 2.1% and exceeds Bank of England target
Inflation in the United Kingdom soared again last month, exceeding economists’ expectations and the Bank of England’s targets, as the gradual reopening of the lockdown measures pushed up the prices of clothing, fuel, and meals in restaurants and bars.
According to data released by the National Bureau of Statistics on Wednesday, consumer product prices rose by 2.1% in the year to May, up from 1.5% in April. The consensus expectation is 1.8%.
Economists are monitoring price increases. The inflation rate slowed to a low of 0.2% last summer, but accelerated as the economy opened up.
Expected increases in gasoline and electricity prices mean that CPI inflation doubled in April, in line with economists’ expectations that they will exceed the Bank of England’s 2% target by the end of the year.
However, the increase in May was even more surprising and may increase the pressure on the central bank to take action to curb price increases.
Bank of England Governor Andrew Bailey said last month that if price increases seem to continue to exceed the target, he will not hesitate to tighten monetary policy, most likely to raise interest rates from the current 0.1%.
Last month’s rise was driven by clothing, car fuel, entertainment supplies, and food in bars, restaurants and pubs, as companies raised prices for customers who want to take full advantage of looser restrictions.
They were partially offset by the decline in food and non-alcoholic beverages.