A worrisome condition of the economy has been prevalent in the country of the UK as the skyrocketing prices of food and fuel shattered the records of the last 40 years. The consumer price index (CPI) has exhibited an unprecedented growth of approximately 9.4% which is just above the projections of 9.1% growth by the sources.
The consumer prices in July rose by 0.8%, which is almost identical to rates in June. Food and motor fuels have been the significant contributors in this aspect, as per United Kingdom’s Office for National Statistics (ONS). The prices of transport showcased a 15% hike in annual costs.
Surprisingly, the official records of ONS report that the last time CPI was recorded at such a high back in 1982. The Bank Of England (BOE) has introduced a hike by 25 basis points for the fifth time in a row with an ambition to curb the menace of inflation.
However, Monetary Policy Committee seeks to consider a hike of 50 basis points in bank rates of interest to cut short the disposable income of the citizens and balance demand and supply to maintain an economic state of equilibrium.
Governor Andrew Bailey has backed his Monetary Policy despite drawing backlash from the Conservative Party. He has further stated the policy has not been a failure of any and was designed only for such circumstances of this kind. The Governor aims to reduce the rates of inflation to as low as 2%.
Hussain Mehdi, macro and investment strategist at HSBC Asset Management, has expressed the probability of a consumer-driven economy being struck by the recession. With citizens being forced to succumb to high-interest rates, a withdrawal from the market is quite a possibility. Hence making a vicious trap for the economy.
Therefore, the Bank Of England needs to intervene in the matter and take necessary measures to revive the economy.
