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UK inflation pressures grow after vote to leave EU
The annual inflation rate as measured by the Consumer Prices Index (CPI) rose to 0.6% in July from 0.5% in June, the Office for National Statistics said.
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“However, if economic growth slows as many expect, then price rises are likely to be limited”.
The results are in from the first significant health check on the United Kingdom economy since Brexit and we now know that inflation rates in the United Kingdom have increased to their highest levels since November 2014, according to official figures from The Office for National Statistics (ONS). The July inflation print for manufactured articles read at 1.83 per cent, with the rate of price rise in edible oil at 4.18 per cent and cotton at 1.52 per cent, reports PTI.
Inflation has been low at both the consumer and producer price levels.
Consumer prices cooled in July as the cost for gasoline fell sharply, helping to keep inflation in check.
The cost of education, recreation and culture has increased between six and seven percent from a year ago which pushed up Qatar’s inflation rate by 2.8 percent last month compared to the same period last year.
The Fed has a 2 % inflation target and tracks an inflation measure which has been stuck at 1.6 % since March.
Today’s CPI data comes amid a gloomy outlook for the economy in the aftermath of June’s European Union referendum.
The last time the Fed raised its benchmark overnight interest rate was in December, the first time in almost a decade. Analysts had forecast that the rate would stay at 0.5 per cent, according to the median forecast in a Bloomberg survey.
Official figures show the United Kingdom economy had picked up pace in the run-up to Britain’s vote to leave the European Union, with gross domestic product (GDP) growing 0.6 per cent in the second quarter, up from 0.4 per cent in the first quarter.
Food inflation came in at a blistering 11.8 per cent, the fastest in 31 months and compared with June’s 8.2 per cent.
“I think it’s still conceivable we could have two rate increases this year”, he said.
Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said the fall in sterling was “entirely responsible” for the rise in CPI inflation.
The pound has dropped about 13 per cent against the dollar since the referendum.
The rise – which was higher than expected – was put down to the increasing cost of motor fuels and second-hand cars, which drove up transport prices. In theory, when the value of a currency falls, the sterling equivalent price of imported goods purchased in a foreign currency increases. The Bank of England is rightly ignoring what should be a temporary spike in inflation when it sets monetary policy.
The London-based Centre for Economics and Business Research said consumer spending has helped drive the recovery in the United Kingdom in 2014 and 2015.
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A dramatic slump in the pound after the Brexit vote helped drive United Kingdom inflation to its highest level since 2014 in July and consumer prices could rise even faster in coming months, according to Britain’s official data agency. Against the euro, the pound has also enjoyed a positive reaction to this morning’s figures, after to a morning nadir GMT of GBR/EUR buying $1.147, rising up to just under $1.152.