Whatâs Going On Here?Inflation in the UK hit a fresh 41-year high in October as prices leapt over 11%, according to data out on Wednesday. What Does This Mean?Youâd have to go all the way back to 1981 â year of the first-ever London Marathon â to see British prices running at the speed they hit last month. Thatâs actually pretty fitting: prices in October were a worse-than-expected 11.1% higher than the same time last year, turning this yearâs inflation battle into less of a sprint and more of an endurance test. A big part of that price pop was down to food prices that were up 16.5%, but even after stripping out food and energy prices, core inflation still sat at a disappointing 6.5%. So while some pundits reckon US inflation might be on the home stretch, Britainâs prices are still running up a steep hill for now. Why Should I Care?Zooming out: Mono-tasking.
Britainâs not the only major nation trying to steady a swaying economic ship right now, but it might just be the only one with a single viable escape route. See, markets panicked when the last government suggested a tax-cutting bonanza, fearing that flooding the economy with cash would further swell inflation â and that sent the pound plummeting. But it looks like this governmentâs learned a lesson, as the new UK finance chief seems to have his sights set on just one task: tackling inflation.
The bigger picture: Same time, same place.
Financial markets were predicting that interest rates would peak at around 4.5% toward the end of next summer, after about six more hikes. And while Wednesdayâs worse-than-expected data is good fodder for attention-grabbing headlines, itâs barely affected marketsâ predictions for rates. Thatâs a relief for now, but another one or two bad inflation reports is all it would take to change things. | 