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High inflation in the UK: Economic stability is on the brink

Herald Publishers by Herald Publishers
January 3, 2022
in Economy
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High inflation in the UK

High inflation in the UK: Economic stability is on the brink

What are the reasons for the high inflation in the UK in recent months?

What do experts and economic organizations predict from the inflation rate in the UK?

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With rising consumer prices in the UK on the eve of the Bank of England meeting on the monetary policy crisis, inflation reached its highest level in 10 years in November. The UK consumer price index rose 5.1 % in the 12 months to November, from 4.2 % in October, the sharpest slope in a decade and more than double the central bank’s target.

Forecasts of high inflation in the UK

Earlier, Reuters economists had forecast inflation at 4.7 % for November, and the Bank of England forecast inflation at 5 % in the spring of 2022 and adjusted to its 2 % target by the end of 2023. UK inflation rose 0.7 % in November from October every month, up 0.4 % from a Reuters poll. The consumer price index, which does not consider fluctuations in energy, food, alcohol, and tobacco prices, rose 4 % from a 3.7 % increase in the previous year, compared with a 0.3 % increase over the forecast. The month before, it rose 0.5 %.

Ambiguity about UK’s economic future

The Monetary Policy Committee of the Bank of England convenes to tighten its monetary policy, increase inflation and stabilize labor market growth. However, the rapid expansion of the Omicron variant has cast doubt on economic recovery in the short term. The British financial institutes have warned that rising electricity bills, sharp inflation in the UK, and rising taxes are likely to create a catastrophic situation in the living expenses of British families.

Rising spending for British households in the coming months

The Resolution Foundation says that from next April, British households will face a reduction in income of £1,200 a year with an increase in energy costs and the implementation of a 1.25 % increase in income tax. Moreover, the high inflation in the UK, which is projected to increase by 0.6% this spring, means that the actual level of wages will not change, and real wages will not be higher this Christmas than this year.

Concerns about declining support for Boris Johnson’s government

The recent warning comes as members of the Conservative Party in the UK Parliament are worried that the wage crisis in the new year. The Resolution Foundation said the peak of economic pressure on British households would occur in April, with electricity bills expected to add around £500 a year and the cost of disability and energy companies failing to add another £100 to customers’ accounts.

Impact of rising prices on low-income British families

Rising prices will disproportionately affect low-income households, which spend most of their income on energy, and are expected to affect 12% of the payment of the poorest sections of British society, compared to the current figure of 8.5 %. The economist said that real wages, which were stagnant in October this year, will certainly decrease and will not increase until the final three months of 2022. That accurate wage payment will increase by only 0.1 % compared to the beginning of the new year.

Continuity of supply chain problems for another year

Most British financial officials believe that supply chain problems in the country will affect the country’s economy for another year. A poll of top British corporate finance executives shows that most believe supply chain problems in the country will continue to affect the recovery from the Covid-19 crisis and continue for another year. As the Bank of England struggles to estimate how long the recent rise in inflation will continue, most financial officials believe inflation will be above 2.5% for another two years.

A high rise in inflation in the UK after leaving the EU

The Bank of England (BOE) forecast double-year inflation at just over 2% in August but estimates inflation at 4% in the next few months. Which has been exacerbated by immigration laws since leaving the EU. The Bank of England is now expected to raise interest rates for the first time since the start of the Covid-19 epidemic this year or early 2022.

Many British financial authorities intend to increase capital expenditures. The news was widely welcomed by UK Prime Minister Boris Johnson, who blamed many employers for supporting the migrant workforce.

Encourage investment in the UK to overcome the crisis

The impact of the Covid-19 epidemic, the exit from the EU, and the shift to clean energy on the UK economy have boosted the country’s investment plans. UK finance minister Rishi Sunak has introduced a new industrial strategy in the budget on October 27, which includes encouraging digital investment and investment in clean energy.

The need for long-term business investment in the UK

The Confederation of British Industry (CBI) said the UK economy was expected to grow slower than previously thought this year and in 2023 due to global supply chain problems. The government should encourage long-term business investment. The CBI cut its forecast for UK economic growth from 8.2% to 6.9% in 2021 and from 6.1% to 5.1% in 2022.

According to the CBI, this forecast decrease reflects weak economic growth Compared with the latest forecasts in June and indicates supply chain problems.

Problems that have slowed the post-recession recovery from last year’s Covid-19 outbreak are likely to end in mid-2022.

Europe has been facing an energy crisis in recent months following a sharp rise in gas prices and a sharp rise in demand following the lifting of restrictions on Covid-19, with the big nightmare of energy prices still looming, according to European media. The crisis in the UK has been far more severe because the Covid-19 epidemic and its exit from the EU have led to a variety of economic problems in the country and have hampered UK economic growth.

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Tags: British householdsCovid-19EconomicEconomic stabilityInflationinflation in the UKlow-income Britishlow-income British familieslow-income familiesthe UK's economic futureUK
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