‘The Bank of England is in an increasingly difficult position.’ – Dominic Bryant, BNP Paribas
British inflation hit its highest level in nearly four years last month, putting pressure on consumers. The Office for National Statistics reported on Tuesday that its CPI surged 2.9% year-over-year in May. That followed a 2.7% rise in the preceding month and marked the largest increase since June 2012. The consumer price jump was mainly driven by the sharp fall in the value of the Pound. In the meantime, the so-called core CPI climbed 2.6% during the reported month, compared to the prior month’s gain of 2.4%, whereas analysts anticipated an increase of 2.3%. Since inflation is rising at a quicker-than-initially-estimated pace, it is not clear for how long the Bank of England will tolerate the inflation rate above the 2% target. Other report released by the ONS revealed that input prices for producers dropped 1.3% on a monthly basis in May, following April’s downwardly revised fall of 0.3% and surpassing expectations for a 0.5% decline. Thus, on an annual basis, rose just 11.6%, down from April’s 15.6%. Tuesday’s data also showed that the Retail Price Index climbed 3.7% year-over-year in May, topping expectations for a 3.5% climb.
