What’s Going On Here?Fresh data out on Wednesday showed UK inflation hit a nine-year high in August, so the Bank of England (BoE) might need to shake itself out of its slumber earlier than it wants to. What Does This Mean?Consumer prices in the UK have been rising fast ever since the government eased pandemic restrictions back in April, climbing 2.7% in the last six months alone (tweet this). And that seems to have come to a head last month: prices were 3.2% higher than they were the same time last year.
This isn’t great news for the BoE, which has maintained for a while that the current spike in inflation is only fleeting. Then again, the central bank was considering raising interest rates anyway – a move that would discourage borrowing and cool down spending. So this data – along with Tuesday’s strong jobs report – won’t just vindicate that decision: it might encourage the BoE to spring into action even sooner than expected. Why Should I Care?The bigger picture: It’s not just consumers...
UK energy prices are surging too – so quickly that two British suppliers went out of business earlier this week. See, energy suppliers tend to lock in the price they pay for energy ahead of time, but Utility Point and People’s Energy hadn’t. Their customers, meanwhile, had locked in their own prices via fixed yearly tariffs, which means the companies were selling energy on for a much lower price than they were paying for it.
Zooming out: And it’s not just in the UK…
Energy prices are surging to record highs all across Europe, and governments are starting to take note: Greece and Spain are handing out subsidies to help their people afford rising energy bills. And since analysts are expecting bills to rise by 20% across Europe, it mightn’t be long before other governments follow suit. | 