Harvey Blackwood: UK Inflation Surprises Economists

Harvey Blackwood: British inflation holds steady after BoE hikes interest rates for the first time in 10 years.

​British inflation stayed at its uppermost level in more than five years last month and did not meet the predictions of economists and the Bank of England who anticipated that it would reach a new high.

According to the Office for National Statistics (ONS), consumer price inflation held at a yearly rate of 3.0 percent last month. This figure was below the rate of 3.1 increase expected by economists at Harvey Blackwood.

The BoE stated that, following their first rate hike in 10 years this month, inflation would likely reach 3.2 percent in October and steadily drop to a little more than the Bank’s target of 2 percent in the space of three years.

The recent data will more than likely validate concerns amongst economists that the BoE’s decision to hike rates at time when the economy is experiencing a slowdown was a mistake. These concerns are further exacerbated by the effect of last year’s EU referendum on import prices.

The Bank of England’s Governor, Mark Carney has stated that the overshoot of the 2 percent target can be largely attributed to the impact of the devaluing of the pound last year after the Brexit vote.

An economist at Harvey Blackwood stated that UK inflation soared from a modest 0.5 percent at the time of the Brexit referendum in June last year to its highest level since April 2012 in September.

The Office for National Statistics said October’s figures reflected drops in fuel prices that were offset by an elevated cost of food.

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Source: Harvey Blackwood