The U.K. posted the biggest jump in annual inflation on record last month as global supply shortages and rising wages magnified the scale of price increases after pandemic-related discounts a year ago.
Consumer price inflation accelerated to 3.2per cent in the 12 months through August from 2per cent the previous month, the Office for National Statistics said Wednesday. Economists had forecast an inflation rate of 2.9per cent.
The unexpected jump in prices may mean that inflation will peak at a higher level and will remain elevated for a longer period than previously expected, according to economists at Berenberg Bank. That would increase pressure on the Bank of England to boost interest rates as it targets 2per cent inflation.
“Heading into an uncertain winter amid rising COVID-19 infections and worsening supply issues, the BoE may need to signal a faster pace of policy normalization to come without spooking likely already nervous markets,” Berenberg said in a note to clients.
Jonathan Athow, deputy national statistician at the ONS, stressed that much of the jump in inflation was the result of an expected rebound in prices that were depressed by the pandemic during the summer of 2020. In particular, the government's Eat Out to Help Out program offered discounts on restaurant meals as authorities sought to bolster the economy after the first national lockdown.
“August saw the largest rise in annual inflation month on month since the series was introduced almost a quarter of a century ago,” he said. “However, much of this is likely to be temporary as last year restaurant and cafe prices fell substantially due to the Eat Out to Help Out scheme, while this year prices rose.”