![]() ![]() Food and beverage prices are some 20% higher than a year ago and water, electricity, and gas prices are more than 25% higher. The overall inflation rate came in slightly above 10% in March. The chart below displays inflation rates by subcategories. economy might fall into a wage-price spiral – a situation in which high wage growth fuels inflation, which feeds back into even higher wage growth, and so forth. This has renewed fears at the BoE that the U.K. While this is good news for workers, it is definitely bad news for the Bank of England (BoE), as the current level of wage growth is inconsistent with the BoE’s inflation target (2%). Last but not least, wage growth has recently accelerated and has been exceeding expectations. labor market is currently quite tight, and Brexit has led to labor shortages across multiple industries, such as transportation and food and hospitality. Leaving the common market increased trade costs and led to depreciation of the British Pound, which has been feeding into higher domestic prices. This “stagflationary” outcome – low growth combined with high inflation – is, to some extent, related to Brexit. It is also the one country where inflation has proved particularly sticky and is currently still exceeding 10%. The United Kingdom is the only G7 economy that still has a slightly lower GDP compared to the end of 2019. Inflation and wages have surprised to the upside ![]()
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