HomeTop Global NewsUK Inflation Remains Stubbornly High, Putting Pressure on Interest Rates

UK Inflation Remains Stubbornly High, Putting Pressure on Interest Rates

UK inflation remained higher than expected for a fourth straight month, raising expectations for the Bank of England to continue imposing interest rate hikes in response.

The Office for National Statistics announced on Wednesday that the Consumer Price Index (CPI) rose 8.7% in May, beating estimates of an 8.4% rise. Core inflation, which excludes food and energy, grew from 6.8% to 7.1%.

Government debt is now larger than the size of the UK economy for the first time since 1961, thereby putting in danger the promise of Prime Minister Rishi Sunak to boost the health of public finances and reduce inflation.

“It is looking increasingly likely that it will require a recession to finally get the inflation genie back into the bottle,” Stuart Cole, chief macroeconomist at Equiti Capital in London observed.

Following these reports, market expectations have risen regarding another interest rate hike by the Bank of England, thereby extending what has been the quickest monetary tightening policy over the past four decades.

Markets are expecting the Bank of England’s key interest rate to hit 6% by December. Investors expect there to be a 50% chance that the Bank of England will implement a half-point hike on Thursday.

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