The UK Consumer Price Index (CPI), an indicator of inflation, jumped to 3.2% annually in August, reaching its highest level in almost a decade.
The Office for National Statistics (ONS) disclosed the CPI figures in its announcement on September 15. The announcement states that the surge in inflation is likely to be temporary, largely due to the underlying impact of the government’s “Eat Out to Help Out” program. Coupled with the VAT cut, which drastically reduced prices in the restaurant sector in August 2020.
A British agency said the restaurant and hotel’s contribution to the headline CPI number was the largest in the history of the series.
“In August 2020, the government’s Eat Out to Help Out (EOHO) scheme discounted many prices in restaurants and cafes, Monday and Wednesday,” ONS said in a statement.
“Because EOHO was a short-term scheme, the 12-month rise in inflation in August 2021 is likely to be temporary,” the agency added.
As the data show, the 3.2% headline’s annual CPI value last appeared at comparable levels in March 2012, when the gauge jumped 3.5%.
ONS said the 1.2% increase in the annual CPI from 2.0% to 3.2% in the 12 months to July is the biggest jump in the series’ 24-year history.
August measurements are well above the Bank of England’s target of 2%, which could intensify calls for a rollback of stimulus measures in the pandemic era.
“Inflation rates will inevitably question the timing of monetary policy tightening and interest rate hikes to further reduce inflation risk,” KPMGUK chief economist Yael Selfin told Reuters. Told.
“But now the tightening is likely to be delayed until mid-next year, as there is a risk of ruining the recovery before it takes hold,” he added.
On a monthly basis, the CPI was flat from June to July and then rose 0.7% from July to August.
Former Treasury Secretary Sajid Javid said Wednesday that the surge in inflation is likely to be temporary, although potential policy movements need to be closely monitored.
“In my view, it’s probably a temporary increase,” Javid told the BBC Radio. “We are seeing rising inflation globally, which is something that every government must take into account future spending plans.”
“It makes a lot of sense to keep an eye on inflation,” he added.
In the United States, the equivalent CPI inflation gauge fell to 5.3% in the 12 months to August. This is 0.1 points lower than the June and July figures, which reflect the sharpest measurements in 13 years.
Reuters contributed to this report.