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LONDON, June 15 (Reuters) – UK inflation unexpectedly jumped above the Bank of England’s 2.0% target as it hit 2.1% in May and looks set to rise further as the country reopens its economy after the coronavirus lockdown.
The increase in price growth from April’s 1.5% was largely driven by comparison with prices in May 2020, when the country was in a severe lockdown for the first time, especially for clothing, motor fuel, games and takeaway.
A Reuters poll of economists had pointed to a rise in inflation to 1.8%.
Investors around the world are assessing the risks of a continued rise in inflation, especially in the United States, where annual inflation reached 5.0% in May, the highest in nearly 13 years, and where US President Joe Biden announced a stimulus package. of $6 trillion.
Jack Leslie, an economist at the Resolution Foundation think tank, said the acceleration in price growth from 0.3% in November to 2.1% in May was the fastest rise in six months since sterling’s collapse after the financial crisis. from 2008-09.
“But the inflationary pressures in the UK are different – and not nearly as great – as the pressures that are causing a heated debate in the US,” Leslie said.
Sterling was little changed by the US numbers.
The BoE has said it expects inflation to reach 2.5% by the end of this year as the economy reopens after the coronavirus lockdowns and global oil prices soar.
Core inflation, excluding the price of food, energy and other volatile items, rose to 2.0% in the 12 months to May, the Office for National Statistics said.
Governor Andrew Bailey and most colleagues say the rise in inflation will be temporary and the central bank will not need to scale back its massive stimulus programs. Policy is expected to remain unchanged on June 24 after the last meeting.
But chief economist Andy Haldane said last week that BoE policymakers were facing the “most dangerous moment” since 1992, when the government removed sterling from the European exchange rate mechanism, a precursor to the euro.
There were signs of further price pressure in Wednesday’s data.
The prices manufacturers paid for their inputs rose 10.7% in the 12 months to May, the highest since September 2011, and the prices they charged rose 4.6%, the largest increase since January 2012.
Reporting by William Schomberg and David Milliken; edit by Alistair Smout
Our standards: The Thomson Reuters Trust Principles.
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