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Britain’s headline annual rate of inflation remained elevated at 8.7% in May, defying expectations that it would fall again. Core inflation, which strips out food and energy prices, rose to 7.1%, the highest it has been since March 1992. The government has promised to cut inflation by half this year from the 10.1% registered in January, but higher prices persist in food, clothing, recreation, health, communications and travel.
The price of housing in Britain is also soaring. The cost of a two-year fixed-rate mortgage has shot above 6% in recent days, as lenders re-evaluate their mortgage products and remove cheaper deals from the market. Banks link their fixed-rate mortgages to market expectations for interest rates, which are rising as the outlook sours on inflation. Official statistics showed rents also surging, by 5% in the year to May, the fastest pace since the data series began in 2016.
With inflation still stubbornly high the Bank of England lifted its key interest rate by half a percentage point, to 5.0%. Before this week’s inflation figures markets had been expecting another quarter-point increase. The central bank has been criticised for allowing inflation to take a grip on the economy and for thinking that rising prices would be transitory.
2023-06-22 08:46:55
Original from www.economist.com
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