UK inflation is weakening: key interest rate could rise soon

Bank of England in London

According to central bankers, the inflation rate will increase by more than four percent this year.

(Photo: Reuters)

London Inflation in Britain weakened slightly in September from a high level. Consumer prices were 3.1 percent above the previous year, according to official data on Wednesday. In August, the inflation rate was 3.2 percent.

Experts interviewed by the Reuters news agency expected it to remain at this level in September. Despite the slight weakening, inflation is well above the Bank of England’s (BoE) target of two percent.

The Bank of England assumes that the inflation rate will rise above the four percent mark this year. According to the latest signals from Central Bank Chairman Andrew Bailey, investors are bracing for two rate hikes by the end of the year. The first step can be on November 4.

The key rate in Britain is currently 0.1 percent. Like many other industrialized countries, the UK suffers from supply chain problems, rising energy prices and a shortage of skilled workers.

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Brexit has compounded the problems. Prime Minister Boris Johnson has admitted that leaving the EU has created tension in the supply chain and in the workforce, particularly in the case of material shortages and logistical problems.

Plus: Killer wage inflation: why it’s unwise to argue in negotiations that everything is getting more expensive

Regina Anderson

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