UK inflation strikes nine-year peak as economy reopens

British annual inflation spiked in August to a nine-year peak on the reopening economy, but last year’s figure had been skewed by a restaurant discount scheme, official data showed Wednesday.

The Consumer Prices Index (CPI) soared to 3.2 per cent, the highest level since March 2012, the Office for National Statistics said in a statement.

That marked a record acceleration from 2.0 percent in July, but the ONS cautioned that the uplift would be temporary.

Global markets have seesawed this year over concerns that central banks will end Covid support measures to tame inflation, but policymakers insist price hikes would be short-lived.

The Bank of England has however warned inflation would strike 4.0 per cent -- double its target -- in the fourth quarter on reopening economies and a global supply crunch that was sparked by the pandemic.

Record rise

“August saw the largest rise in annual inflation month on month since the series was introduced almost a quarter of a century ago,” said ONS statistician Jonathan Athow.

“However, much of this is likely to be temporary as last year restaurant and cafe prices fell substantially due to the ‘Eat Out To Help Out’ scheme, while this year prices rose.”

Inflation in August 2020 had been depressed by the discount scheme and temporary tax cuts aimed at boosting the Covid-hit economy.

“The vast majority of August’s rise was due to comparisons with a weak 2020, with last August having seen both the VAT cut for the hospitality sector and the Eat Out to Help Out scheme,” noted EY economist Martin Beck.