The UK’s inflation rate has risen to 3% in the year to January, exceeding expectations of 2.8%. Economists point to Chancellor Rachel Reeves’ record budget as a major contributor to rising costs. The Bank of England expects inflation to hit 4% by the end of the year, forcing Governor Andrew Bailey to write to the Chancellor on price rises.
Higher energy costs are also driving up consumer costs, but economists claim that some policies implemented by Chancellor Reeves will keep prices high. These include increasing the minimum wage and a £25bn increase in employer National Insurance contributions.
Food prices rose 3.3% over the past year, with meat and bread being the main drivers of inflation. Economists warn that food price rises are likely to continue due to government policies, including a new packaging levy.
The Bank also expects services prices to rise, driven by higher wages and airfares. The Chancellor’s decision to impose VAT on private school fees has added to overall education costs. However, the main driver of inflation is expected to be energy prices.
Interest rates are likely to remain high for longer due to the Bank’s forecast that inflation will not return to its 2% target until 2027. Traders trim their bets on a rate cut in May, citing mounting inflation headwinds and rising business costs.
Source: https://www.yahoo.com/news/taxes-reigniting-britain-inflation-nightmare-093052232.html