Or due to a decrease in car fuel prices, inflation in the UK may fall back to its lowest level in a year and a half
After a year and a half of sustained high inflation, data from the UK Office for National Statistics in June showed that inflation in the country had slowed down for the first time. However, experts warn that brief data fluctuations cannot represent a slowdown in overall inflation rates. The UK may still need to maintain or intensify its regulatory policies for a period of time in the future.
According to a report by The New York Times on July 19th, earlier that day, the UK National Bureau of Statistics stated that the UK Consumer Price Index rose by 7.9% year-on-year in June, marking the lowest inflation rate in the UK since early 2022. The degree of slowdown has significantly exceeded economists' previous expectations. According to economist analysis, the main reason may be due to the significant decrease in automotive fuel prices.
On the other hand, food prices in the UK increased by 17.3% year-on-year in June. Although this number is still high, the food inflation rate has fallen from its peak of 19% in April. The core inflation rate, excluding food and energy prices, was 6.9% in June, a decrease of 0.2% compared to the previous month.
Although the overall inflation rate has slowed down, the sustained growth in consumer spending and the demand for wage growth indicate that the UK is still in a state of high inflation. Andrew Goodwin, an economist at the Oxford Institute of Economics, said that the downward pressure on inflation is a "rare and welcome surprise". But Goodwin also added that part of the reason for the slowdown in inflation comes from volatile categories such as furniture prices, and he does not believe that "the released data will change the current game rules.".
In the past 18 months, the sustained high price levels have seriously eroded the household budget expenditures of the British people. As early as January, the UK government promised to halve the inflation rate by the end of 2023, which means the inflation rate will drop to 5.2%. Economists expect to see a significant slowdown in inflation rates in the second half of the year, however, fulfilling the government's expected commitments will not fully solve the inflation problem currently facing the UK. The task of the Bank of England is to ensure price stability, and its expected measure requires a 2% inflation rate to reduce the impact of rising prices.
Compared with before the COVID-19 epidemic, there are still more unemployed people and more job vacancies in the UK. Although employers are raising wages to attract and retain workers, most wage increases cannot match the sustained high inflation rate. On the other hand, wage growth is becoming a persistent problem of rising prices, as companies attempt to pass on higher labor costs to employees and consumers in the form of rising commodity prices.