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Friday, December 8, 2023

UK inflation holds steady at 8.7%, defying expectations of modest decline World News


UK consumer price inflation was unchanged at 8.7% in the year to May, official data showed on Wednesday, against expectations for a slight decline, a development that will lead the Bank of England to raise borrowing costs again.

Financial markets took news of no change in interest rates to mean the Bank of England would raise its benchmark interest rate on Thursday. (representative image)

Higher prices for flights, entertainment and cultural goods and services, and used cars drove up inflation, while petrol prices provided the greatest downward pressure, the ONS said.

“Annual inflation was little changed in May and remains at historically high levels following last month’s decline,” said Grant Fitzner, the agency’s chief economist.

The news of no change in interest rates is seen by financial markets as a sign that the Bank of England will raise its benchmark interest rate on Thursday from its current 15-year high of 4.5%.

Like other central banks, the central bank has sharply raised borrowing rates over the past 18 months or so after inflation soared, first because of bottlenecks caused by the coronavirus pandemic and then because of Russia’s invasion of Ukraine, which sent energy and food prices soaring .


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