UK inflation hits 10.1% on rising food and energy costs

LONDON — Inflation in Britain rose to a new 40-year high of 10.1% in July, a faster pace than in the US and Europe, as rising food prices in the UK sharpened the cost of living fueled by the rising cost of living. energy costs.

The double-digit rise in consumer prices a year earlier was ahead of analysts’ central forecast of 9.8% and a jump from the annual rate of 9.4% in June, the Office for National Statistics said Wednesday. The increase was largely due to rising prices for food and staples, including toilet paper and toothbrushes, it said.

Most economists believe the worst is yet to come. The Bank of England says rising natural gas prices are likely to push consumer price inflation to 13.3% in October. It says this will push Britain into a recession expected to last until 2023.

That pressure prompted the bank to raise its key interest rate by half a percentage point this month, the largest of six consecutive hikes since December. The percentage now stands at 1.75%, the highest since the low point of the global financial crisis in late 2008.

“We expect another 50 bps (bps) rate hike in September,” said James Smith, developed markets economist and ING Economics. “We are not ruling out a new walk in November.”

Inflation is rising in many countries as the Russian war in Ukraine has led to unprecedented increases in energy prices worldwide. Russia has cut natural gas supplies to Europe in retaliation for the West’s support for Ukraine, sparking a crisis for the fossil fuel that powers factories and warms homes in the winter.

The gas problems threaten a recession in the 19 countries sharing the euro, where inflation reached a record 8.9% in July. The United States has already seen two quarters of economic contraction, raising fears of a recession. US inflation eased slightly to 8.5% in July but is still close to a four-decade high.

“I understand that times are tough and people are concerned about price increases that countries around the world are facing,” said Nadhim Zahawi, head of the UK’s treasury.

“While there are no easy solutions, we help where we can,” he said, including a £400 ($483) payment to households facing sky-high utility bills.

Britain’s Conservative government is under pressure to do even more to help people cope with the cost of living crisis. The average household fuel bill in the UK is up more than 50% this year, and in October the average bill is expected to be £3,500 ($4,300) a year.

Prime Minister Boris Johnson will resign from office next month and says any new measures should be left to his successor. The favorite to replace him, Secretary of State Liz Truss, opposes sweeping interventions and says she prefers tax cuts over ‘handouts’.

The other contender, former Treasury chief Rishi Sunak, introduced a 25% windfall on oil and gas company profits in May, expected to bring in several billion pounds to help fund payments for those with rising energy costs. Opposition politicians want the tax extended to electric utilities — a move Truss vehemently contradicts, saying, “I don’t think profit is a dirty word.”