UK inflation has surged to a 10-month high, reaching 3% in January, according to official figures. This increase is likely to disappoint expectations of swift interest rate reductions from the Bank of England. The spike was largely due to rising airfares, food costs, and private school fees following the new Labour government’s decision to impose a sales tax.
Economists had predicted an inflation rate of 2.8%, but the sudden jump has raised concerns among central bank officials. This comes as they already express worries about the UK’s slow economic growth. The Bank of England recently cut interest rates by a quarter of a percentage point, citing reduced growth forecasts for the country.
The new government’s goal to boost living standards and fund public services is now under threat. With growth remaining elusive, the party’s popularity has plummeted since its election victory in July. While some economists predict inflation will rise further, it may start trending lower by mid-year, giving policymakers room to cut interest rates again. However, a significant reduction in rate cuts seems unlikely, with the bank maintaining a gradual pace of easing for now.
Source: https://apnews.com/article/britain-inflation-interest-rates-c2fa8e840d99ea1fb860be9518b37d6f