UK Inflation Tops 10%, Highest Since 1982.

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British consumer price inflation jumped to 10.1% in July, its highest since February 1982, up from an annual rate of 9.4% in June, intensifying the squeeze on households.

The increase was above all economists’ forecasts in a Reuters poll for inflation to rise to 9.8% in July, and will do nothing to ease the Bank of England’s concerns that price pressures may become entrenched.

Despite warning that a recession was likely, the BoE this month raised its key interest rate by 0.5 to 1.75%; its first half-point rise since 1995.It forecast inflation would peak at 13.3% in October, when regulated household energy prices are next due to rise. read more

“Every upward inflation surprise tightens the bind the BoE finds itself in, with mounting inflation pressure; combined with growing recessionary headwinds,” said Luke Bartholomew, senior economist at asset management at asset manager abrdn.

Two-year British government bond yields – which are sensitive to interest rate expectations; surged to their highest since June 21, when they had struck a 13-year high.

Reuters.

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