12 minutes ago 12:09
Larry Elliott: Stagflation seems to be worse than racing security for households in the UK
High inflation will persist for some time, warns our economic editor Larry Elliott, which means the UK is likely to experience stagflation or even recession.
While there should be some reduction in the annual rate in the summer, there is likely to be a new rise in the autumn, when the energy price ceiling will be adjusted again. Inflation will remain at 7% or more until the end of 2022.
The strength and persistence of inflation creates economic and political problems for the government. Stagflation – a toxic combination of stagnant production and rising inflation – is competitive security, but there is also a risk of rising living standards caused by prices rising faster than wages, leading the economy into recession.
15 minutes ago 12:07
The rise in inflation in the United Kingdom to 7% in March means that the Bank of England is facing a difficult interest rate dilemma.
BoE is expected to raise borrowing costs again next month, from 0.75% to 1%, as the CPI continues to rise above its 2% target.
The bank is concerned about the effects of the “second round” – when rising inflation expectations are forcing companies to raise profit margins or workers to seek higher-paying deals.
But as the economy slows, higher interest rates are also increasing the risk of recession.
Urvis Patel, an associate economist in macroeconomic modeling and forecasting at the NIESR research institute, says the bank has “increasingly difficult” choices.
Our measure of core inflation, which excludes extreme price movements, rose to 5.6% in March from 5.1% in February.
NIESR predicts that annual consumer price inflation will peak in the third quarter of 2022 at over 8%, as the direct impact of the war in Ukraine, as well as side effects, affect consumer prices. The Bank of England’s dilemma is becoming increasingly difficult as more frequent interest rate hikes risk pushing the UK into recession, while a more gradual approach could cause macroeconomic instability.
1 hour 11: 251 h before 11:00
The effects of economic sanctions on Russia are beginning to be felt
Prices for liquid fuels have more than doubled in the last year, up 113.9%, raising spending on families who rely on oil to heat their homes.
With the 30% increase in motor fuel and the rise in commodity prices paid by producers, inflation data from March reveal the economic impact of the Russian invasion of Ukraine and subsequent sanctions.
Jonas Keck, an economist at CEBR, says:
While the United Kingdom is less dependent on Russian energy imports than other European countries, changes in world demand are still affecting British prices. This can already be seen in the figures for March, highlighted by rising prices for liquid fuels.
Keck also warns that the cost of living crisis will worsen as real regular wages do not keep pace with rising prices and Chancellor Rishi Sunak’s fiscal support package does not live up to expectations.
2 hours ago 10:41
Mark Sweeney
Tesco doubled pre-tax profits to more than £ 2bn last year, but warned of profits this year as it faces a battle to “keep the price of the weekly store under control” amid rising inflation, which is raising costs and shrinks household budgets. Total revenue for the UK’s largest supermarket, which won the pandemic by taking a share of competitors and boosting online sales, rose 6% to £ 61.3 billion after pre-tax profits jumped 1.1 billion pounds to 2.2 billion pounds in the year to the end of February 26. However, the company warned of “significant uncertainties” in business, including whether customer shopping behavior will change as the nation emerges from the coronavirus pandemic, cost inflation and investment to keep prices low compared to budget operators. , such as Aldi and Lidl.
Shares of Tesco fell 4.5% this morning.
Updated at 11:18 BST
2 hours ago 10:29
Full story: inflation reached 7% in March as the cost of living in the UK rises
Richard Partington
Households in the UK are under renewed pressure from rising living costs after official inflation reached 7% last month amid record increases in petrol and diesel prices.
Data from the National Statistics Service show that the last rise in the consumer price index is the fastest in three decades, a month after the barometer of rising living costs jumped 6.2% in February.
With a massive rise in prices in the economy, the biggest increase came in the cost of filling the pump after Russia’s invasion of Ukraine brought global oil prices close to record levels amid fears of supply disruptions and sanctions.
Inflation in the United Kingdom
Average petrol and diesel prices rose to a record 160.2 pence and 170.5 liters respectively, rising by more than 30% in the last year, the biggest annual increase since 1989.
Prices for restaurants and hotels also rose sharply in March, as they were not available last year during the blockade, while there were increases in a number of different foods as the price of the weekly store rose.
Here is the whole story:
Updated at 10.35 BST
2 hours ago 10:19
Interest rates on student loans to reach 12%, then fall into “wild fluctuations”
Richard Adams
The government must act swiftly to avoid raising student loan interest rates after 2012 to 12% in England and Wales, according to the Institute for Fiscal Research.
Based on today’s RPI inflation, IFS said that graduates earning more than £ 49,000 will receive interest rates of 12% on their loans, while those on lower incomes face 9% from September this year.
IFS says the increase will mainly affect higher-income graduates, as they are more likely to repay their loans in full, while lower-income earners will be wiped out of their remaining balances 30 years after graduation.
An alumni who earns more than £ 49,000 will have to pay an additional £ 3,000 on the remainder of the £ 50,000 student loan, IFS estimates. But graduate students are said to be facing a roller coaster ride of sharply rising and falling interest rates over the next few years.
Ben Waltman, a senior economist and researcher at IFS, said:
“Unless the government changes the way interest rates are set on student loans, there will be incredible fluctuations in interest rates over the next three years. The maximum rate will reach an irritating level of 12% between September 2022 and February 2023 and the lowest level of about zero between September 2024 and March 2025.
“There is no good economic reason for this. Interest rates on student loans should be low and stable, reflecting the government’s own borrowing costs. The government urgently needs to adjust the way the interest rate cap works to avoid a significant jump in September.
The IFS information note explains how RPI inflation (which reached 9% in March) was used to set interest rates on student loans.
The interest rate cap is intended to prevent interest rates on student loans from rising above the prevailing market rates on commercial loans. But it is running six months late, between interest on student loans exceeding the ceiling and the interest rate on student loans actually reduced.
The information note warns that the interest rate train will create problems.
The way in which the interest rate ceiling currently operates puts borrowers at a disadvantage with declining debt balances for no good reason.
Perhaps more importantly, incredible interest rates may deter some prospective students from going to university; some graduates are likely to feel compelled to repay their loans, even when it is of no use to them.
Updated at 11:18 BST
2 hours ago 10:02
Home prices in the UK have also continued to rise.
The average house price increased by 10.9% in the year to February 2022, compared to 10.2% in January 2022.
Prices rose 0.8% during the month, following a monthly rise of 1.1% in January, despite the prospect of rising interest rates until inflation cools, which raises borrowing costs.
Commenting on today’s HPI data for February and rental data for March, ONS housing price statistician Ceri Lewis said: ⬇ pic.twitter.com/SFbqt97epN
– Office for National Statistics (ONS) (@ONS) 13 April 2022
More information:
- The average housing price in the United Kingdom was £ 277,000 in February 2022, which is £ 27,000 higher than last year.
- Average house prices rose during the year in the UK to £ 296,000 (10.7%), in Wales to £ 205,000 (14.2%), in Scotland to £ 181,000 (11.7%) and in Northern Ireland to £ 159,000 (7.9%).
- London continues to be the region with the lowest annual growth of 8.1%.
🏡 Inflation is also developing in the British housing market.
New ONS data show that prices rose 10.9% in the year to February.
This is the largest increase since at least 2005, with the exception of two jumps in June and September last year, when the deadlines for stamp duty relief expired. pic.twitter.com/XSWeoM977B
– David Milliken (@david_milliken) April 13, 2022 2 hours ago09: 56
Rental inflation is highest since 2016
Rents are rising at the fastest pace in almost six years, increasing pressure on households.
ONS reports that private rental prices paid by tenants in the United Kingdom increased by 2.4% in the 12 months to March 2022, the highest annual growth rate since July 2016.
But rents jumped 3.3 percent, excluding London, according to ONS:
Rental price growth in London in March 2022 (0.4%) remains the lowest in any of the regions in England.
This reflects a reduction in demand, with remote work changing housing preferences as workers no longer have to be close to offices.
United Kingdom rent Photo: ONS 3 hours ago 09:46
Reuters’ David Milliken said that the prices of motor fuels (+ 30.7%) and clothing and footwear (+ 9.8%) had seen a record price increase in March:
Some of the annual price increases for March: ⛽️ + 30.7% (the largest in history) ⚡️ + 24.8% (the most since 2009) 👗 + 9.8% (the largest in history) 🛒 + 5.9% (highest since 2011)
(And the older but still widely used RPI inflation rate reached 9.0%, the highest since January 1991)
– David Milliken (@david_milliken) April 13, 2022 3 hours ago09: 43
Food inflation is highest since September 2011
The jump in food and soft drink inflation …
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