Truly support
independent journalism
Our mission is to provide unbiased, fact-based reporting that holds the powerful to account and exposes the truth.
Whether it’s $5 or $50, every contribution counts.
Support us in offering journalism without agenda.
Labour is set to face another early financial blow as inflation is expected to rise for the first time this year.
Official figures due out on Wednesday are expected to show inflation rose above the Bank of England’s 2 percent target in July.
Pantheon Macroeconomics expects the rate to rise to 2.3 percent between July 2023 and 2024, after remaining at 2 percent in the years through May and June.
Wage growth, energy bills and holiday-related price increases for airfare and hotels are among the factors behind the expected rise in inflation.
Inflation measures the increase in prices over time.
When the exchange rate is high, the value of the pound falls even further, leading to a reduction in consumers’ purchasing power.
News of rising inflation would highlight the battle between the Bank of England and the new Labour government to keep prices under control.
Chancellor of the Exchequer Rachel Reeves has already issued a stark warning about the economy, highlighting a £22bn black hole in the public finances last month.
In a statement to Parliament last month, he outlined long-term plans to fix the foundations of our economy.
See: What is inflation?
Alex RossAugust 13, 2024 10:30 PM
Factors explaining the expected increase in inflation
Economists expect official figures on Wednesday to show inflation rose above the Bank’s 2% target in July, driven in part by holiday-related price increases in airfares and hotels.
Another factor is energy prices. Bills fell sharply in the first six months of 2023 and 2024, dragging down headline inflation, but they fell more gradually between July 2023 and this year, so the downward impact will be smaller and will ultimately increase the year-on-year inflation rate.
Inflation peaked at 11.1% in October 2022, following a sharp rise in energy prices triggered by Russia’s invasion of Ukraine.
Alex RossAugust 13, 2024 20:30
Economists predict inflation will rise in July
Consulting firm Pantheon Macroeconomics said it sees inflation rising 2.3% between July 2023 and 2024, after holding at 2% in the years through May and June.
Rob Wood, Pantheon’s chief UK economist, said: “The price of a one-night hotel stay has been very high this year, partly reflecting a new seasonal pattern since Covid… plus hotels are likely charging a form of dynamic pricing (based on demand).
“The ONS surveys only about 100 hotels, meaning outliers, such as a Welsh hotel price in June driven by demand for a Pink concert, can distort the figures,” he said.
“But some hotel price inflation is genuine, as a number of travel-related and labor-intensive service components of the CPI have been strong this year,” he added.
Alex RossAugust 13, 2024 7:30 PM
What is inflation?
The Bank of England (BoE) defines inflation simply as a term used by economists to “describe the rise in prices over time.”
Rising costs for goods and services in UK shops indicate that the value of the pound is declining, which in turn means a reduction in consumers’ purchasing power and therefore their quality of life as they are discouraged from spending more than they can afford.
This in turn affects national economic growth.
Alex RossAugust 13, 2024 18:30
Welcome
Good evening and welcome to our inflation blog which will cover analysis and reaction to the figures due out on Wednesday.
Alex RossAugust 13, 2024 17:19
#Labour #faces #battle #inflation #forecast #exceed #target #live