[ad_1]
Britain’s inflation eased from a 41-year high on Wednesday, but the recession brought only limited relief to a nation reeling from a deepening cost-of-living crisis.
Consumer prices in Britain rose 10.7 percent in November from a year earlier, bringing inflation down slightly from 11.1 percent in October, the highest annual rate since 1981, the Office for National Statistics said.
Despite this tentative sign that inflation has peaked, British households are being squeezed by higher energy bills, food costs and mortgage rates, while wage growth has failed to keep up with inflation. Based on data from the mid-1950s, Britons face the steepest decline in living standards on record over the next two years. It fueled a rising wave of labor unrest. Railway and postal workers are on strike on Wednesday over demands for higher pay, while nurses are set to walk off the job on Thursday.
On a monthly basis, prices rose 0.4 percent in November, easing October’s sharp pace when they rose 2 percent in a month due to higher energy costs, even as the government spent billions to cap household gas and electric bills.
Core inflation, which excludes energy and food prices, eased to an annual rate of 6.3 percent from 6.5 percent in October. Economists had expected core inflation to hold steady, according to a Bloomberg survey. Decline in transportation prices, particularly fuel, as well as clothing and entertainment services, all contributed to the lower overall inflation rate, while increases in restaurant and grocery prices partially offset it. Food prices rose by 16.4 percent in November from a year ago.
Overall, Wednesday’s inflation data is “undoubtedly welcome,” Sandra Horsfield, an economist at Investec, wrote in a note. But “10.7 percent consumer price inflation is still running ahead of average income growth, which households can easily justify.”
“There is still a long way to go before we hear full clarity on inflation,” she added.
A drop in the overall inflation rate will be encouraging to Bank of England policymakers who have raised interest rates sharply to try to tame inflation. Inflation in the United States also slowed more than expected, data released on Tuesday showed.
But this is not enough to declare victory for central bankers, as they target a 2 percent inflation rate. Policymakers want to combat the risk that high inflation will persist for years to come. They are wary of how much businesses raise prices to consumers and how much wages rise in response to a higher cost of living and a tight labor market.
Data published on Tuesday showed that average pay in Britain, excluding bonuses, rose at an annual rate of 6.1 per cent in the three months to October. Although it is slower than the rate of inflation, policymakers argue that this pickup in wages is still high enough that inflation can return to a sustained target.
On Thursday, Bank of England policymakers are expected to raise interest rates for the ninth consecutive time from 3 percent to 3.5 percent. The half-point increase would coincide with a rate change by the Federal Reserve on Wednesday and an expected hike by the European Central Bank on Thursday. All three central banks expect a slowdown from the previous three-quarter point increase in interest rates.
Policymakers are expected to slow the pace of rate hikes as they assess the impact of months of tight monetary policy to dampen economic demand to curb inflationary pressures. In Britain, the central bank’s rising benchmark rate, up from 0.1 percent a year ago, has already led to a significant rise in mortgage rates, millions of households facing sharp increases in payments next year, and house prices falling.
While the inflation outlook is uncertain, the Bank of England predicts that the rate of price increases will slow sharply from the middle of next year as past jumps in energy prices fade out of annual calculations.
But the price of high inflation won’t drop as fast. The British economy is already in a recession that the central bank predicts will last until next year. Households will remain under “significant pressure” from inflationary wage gains, higher mortgage costs and an expected rise in unemployment, according to a financial stability report by the Bank of England published on Tuesday.
The Joseph Rowntree Foundation, a nonprofit, said Wednesday that more than 7 million households were “going without essentials,” meaning they reported going hungry or skipping meals or not having enough clothing, based on a survey. Only 50 lakh households are said to be in arrears on at least one household bill.
“I know it is difficult for many people right now, but it is vital that we take the tough decisions needed to tackle inflation – the No. 1 enemy that makes everyone poorer,” Jeremy Hunt, Chancellor of the Exchequer, said in a statement. In response to inflation data on Wednesday. “If we make the wrong choices now, higher prices will continue and prolong the pain for millions.”
The tough stance comes as government ministers are locked in discussions with unions over improving pay offers following a long history of under-inflation pay. Recently a large gulf has opened in between Salary growth in private and public sectors. Before accounting for inflation, private-sector wages rose at an annual rate of 6.9 percent in the three months through October, but only 2.7 percent for public-sector workers, data released Tuesday showed.
Pat Cullen, chief executive of the Royal College of Nurses, the union whose members will go on strike on Thursday and again next week, accused the government of “intransigence” as talks broke down.
[ad_2]
Source link
