Inflation: Bank of England facing 'tricky dilemma' says Martins
We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info
The Federal Statistical Office of Germany estimated a 5.3 percent inflation rate for December 2021, according to estimates by the nation’s Consumer Price Index. This estimate is +0.5 percent on November 2021 and the inflation rate for 2021 is expected to stand at +3.1 percent. This is the highest inflation rate the country has seen since 1993.
The UK has also seen high inflation rates but it is currently sitting at a lower level than Germany.
While the UK figures for December 2021 have not yet been published, in November 2021 food prices rose more than two percent faster in Germany than the UK, according to economist Julian Jessop.
In the same period, the overall price increase in Germany was 0.1 percent higher than the UK’s, Mr Jessop suggests.
The inflation rate for food was at 4.5 percent in Germany in November, but sat at a lower level of 2.4 percent in the UK.
This marks the first time since the reunification of Germany that inflation has passed the five percent mark.
But economists have warned it could be some time before German inflation rates fall again.
Speaking to the dpa news agency, a spokesperson for the Leibniz Institute for Economic Research said: “The sharp rise in natural gas prices is not likely to reach consumers until the beginning of 2022 due to the existence of long-term contracts with gas suppliers in many cases.”
Peter McCallum, a bank rates strategist at Mizuho Bank, told Reuters: “There is still a sense that [eurozone] inflation could surprise to the upside for longer than expected, so markets have to position for the view that the ECB could capitulate and move earlier on rates.”
Inflation rates have risen sharply across Europe, partly as a result of economies reopening after the pandemic.
As coronavirus restrictions have been lifted, people are spending more money but many companies are finding it difficult to keep up with rapidly rising demand as many operations slowed down or scaled back during the pandemic.
The issue has been compounded by high energy prices, which has driven up inflation even further.
Rising food prices forced shoppers in the UK to pay nearly £15 more for their average monthly grocery bill in December, according to analysts at data firm Kantar.
‘Chill out and fall back!’ Prince William suffers brutal dig [REACTION]
School closure warning: Pupils face being sent home in WEEKS [ANALYSIS]
Meghan and Harry may not receive £18m from Spotify deal [REVEAL]
The British Chambers of Commerce warned many firms have said they are running low on cash and, as a result, have ditched investment plans in an attempt to stay afloat into the new year.
According to Suren Thiru, the BCC’s head of economics, this is partly a consequence of firms struggling with the “mounting headwinds” of inflation.
But the Bank of England and the European Central Bank have both said they expect inflation to fall in 2022.
The Bank of England said: “We expect the rate of inflation to fall quite quickly from the second half of 2022, as the effect of these temporary factors ends. And we expect it to keep falling in 2023.
“But even though the rate of inflation will slow down, the prices of some things may stay at a high level compared with the past.”
It estimates the inflation rate will reach around six percent by spring 2022 before falling back down to around two percent.
The Bank of England added: “We know some people are worried there will be a return to the high rates of inflation that the UK experienced in the 1970s. But we are confident that inflation will not get anywhere near those levels this time.
“We expect inflation to stay high over the coming year, then start to fall back towards two percent.”
Source: Read Full Article