Core Inflation Reaches 6.5%, Further Base Rate Increases Predicted

Core Inflation Reaches 6.5%, Further Base Rate Increases Predicted

Inflation is a key economic indicator that measures the rate of change in prices of goods and services over a period of time. Recently, core inflation in the United Kingdom has reached 6.5%, the highest level since 2011. This is causing concern among economists, as it is well above the Bank of England’s target rate of 2%.

The primary cause of this increase in core inflation is the devaluation of the pound following the Brexit vote. As the pound has weakened, the cost of imported goods has risen, pushing up inflation. This has been compounded by rising energy prices, which have increased by 7.6% over the past year.

The Bank of England has responded to this increase in inflation by raising the base rate from 0.25% to 0.5%. This is the first time the base rate has been raised since 2009 and is intended to help curb inflationary pressures. However, some economists are predicting that further increases may be necessary in order to keep inflation under control.

The impact of higher inflation on households is likely to be mixed. On the one hand, higher inflation can lead to higher wages as employers seek to keep up with rising prices. On the other hand, higher prices can also lead to reduced spending power, as wages fail to keep up with inflation.

Overall, it is clear that core inflation in the UK has reached a worrying level and further base rate increases may be necessary in order to bring it back under control. It remains to be seen how households will be affected by these changes and what impact they will have on the wider economy.

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