United Kingdom Posts Record Rise In Inflation

Consumer prices in the United Kingdom rose at their fastest recorded rate ever during August due to global supply shortages and higher employee wages.

The British Office for National Statistics said inflation accelerated to 3.2% in the year through August from 2% in July this year. The scale of the increase month-on-month was the biggest since the measure of inflation was first introduced a quarter of a century ago.

The spike takes inflation way above the Bank of England's target of 2% and is likely to increase pressure on policymakers to consider raising interest rates from record lows.

The increase was slightly more than anticipated in financial markets, with most economists predicting a spike of 3% for August.

Because inflation has risen by more than one percentage point above the Bank of England's target, its governor, Andrew Bailey, will have to write a letter to Treasury Chief Rishi Sunak explaining what's going on with the economy.

Bailey is widely expected to say that much of the increase was due to temporary factors related to the pandemic. Over the past decade, the central bank has tolerated higher-than-target inflation provided it thought the underlying reasons behind the increase were transitory.

Restaurant prices were a big reason behind the August inflation spike, as last year the government offered discounts on meals through its "Eat Out to Help Out" scheme in an attempt to bolster the economy in the wake of the first COVID-19 lockdown.

Under the program, sitting customers were able to receive a 50% discount on food and non-alcoholic drinks at participating restaurants. It was a hugely popular scheme with more than 100 million discounted meals eaten in the United Kingdom.

A sharp rise in energy prices as the global economy recovers from the pandemic also bolstered August inflation in the United Kingdom.