Food inflation in the UK has reached its highest point in 14 years due to rising milk, cheese, and egg prices.
In the year leading up to August, food prices increased at their quickest rate since 2008 as the conflict in Ukraine continued to contribute to price increases at supermarket checkout counters.
Although the total inflation rate somewhat decreased due to falling gasoline and diesel costs, official data indicate that it is still very close to a 40-year high. Prices are rising faster than incomes, which is cutting into budgets.
The overall rate of inflation in the UK which gauges how quickly prices grow, decreased in August from July’s 10.1% to 9.9%, marking the first time in nearly a year that it has slowed.
The number was not as high as analysts had anticipated, but some have warned that the rate of inflation is expected to climb further given how rapidly the cost of food, clothing, and services—which includes items like prices at stores and restaurants—has been increasing.
In order to attempt and contain inflation, the Bank of England has warned that it could reach 13% this year.
However, the government’s decision to try to minimize widespread misery by capping increases in family energy bills is probably going to mean inflation won’t grow as high as previously anticipated.
One of the things driving higher prices at supermarket checkouts is that food prices have been rising everywhere since Russia’s invasion of Ukraine. The two nations, significant exporters of products including wheat, fertilizer, and sunflower oil, have disrupted their supplies by the war.
The slowing of inflation results from a summertime break in gas prices. The idea would have been absurd even a week before the Energy Price Guarantee. In contrast, this should reduce headline inflation by 4 to 6 percentage points soon.
Other sources of inflation
Basics like milk, cheese, and eggs were the main drivers of the highest monthly rate of food price growth since 1995.
The price of services is continuing to rise as well, reflecting rising wages across wide segments of the economy.
Naturally, prices are rising far more quickly than wages and over the Bank of England’s 2% objective, even at a 9.9% annual rate. The Bank will probably continue to hike interest rates in the upcoming months.
Since energy costs are expected to rise next month, it is anticipated that this will be a drop before more increases.
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The peak, when it materializes, should, however, be considerably closer to where we are today than was first projected before the Prime Minister’s energy guarantee, probably 11 or 12%. The rate of price growth is known as inflation. Inflation in milk, for instance, is 5% if a milk bottle costs £1 and goes up by 5p from a year ago.
The Bank of England is one of many central banks around the world that have raised interest rates in an effort to rein in the spiraling inflation. Raising interest rates is a method of reducing inflation by increasing the cost of borrowing and motivating individuals to borrow less. People are also prompted to save more money by it.
Due to the passing of Queen Elizabeth II, the Bank decided to postpone the highly anticipated rate increase that was scheduled for Thursday. On September 22, the Monetary Policy Committee’s conclusion will be made public.
When the Bank of England made its most recent decision, Institute of Director’s head economist Kitty Ussher indicated she still anticipated rising interest rates.
Inflation in the UK drives costs of housing
House prices experienced their largest annual increase in 19 years the year to the end of July, according to independent numbers released by the ONS.
15.5% more was added than the previous month’s 7.8% annual increase.
The consequences of the stamp duty vacation last year were primarily to blame for the increase. From July of last year until its gradual elimination in October of 2021, the stamp duty holiday in England and Northern Ireland was scaled back.
Last year, a similar exemption from property taxes in Wales and Scotland came to an end at the end of June and March, respectively. All were in reaction to worries about the financial impact of Covid lockdowns. Due to the price declines that were observed at this time last year, this July’s increase was primarily caused by comparison.
In July, the ONS reported that the average property price in the UK was £292,000.
