Inflation is United Kingdom is increased. Consumer price in United Kingdom is reported to be 8.7%. It remained steady for the consecutive second month. Which means the rate of price hike is same in May as it was in April 2023 but is dropped as compared to October 2022 which was 11/1%. A part from that food inflation on items like bread, cereal and chocolate have come down slightly, although remains high at 18.3%.

Reasons of Price Hike and Inflation in UK:

Major reasons of Inflation in UK are Brexit (Exit of UK from Europe Union), Covid 19 and Russia Ukraine war. Another factor is the large number of immigrants that are moving towards UK. Resultantly UK is facing serious shortfall in some food items and its reproduction. This is because of labor shortage as well.

Current price hike is reported to be 25% considered to be highest since 2018.

Price of a can of Red Beans is doubled since 2018. Similarly price of some household DIY items are also soaring. Air fares, prices of second hand vehicles, music and video games etc are also recorded as higher.

Inflation in UK and Increase in Interest Rate:

Recently the Bank of England has raised interest rate to 4.7% with an increase of 0.25%. This is the consecutive 13^th increase in rate and this increase is expected to rise to 5%. The interest rate is increased to reduce inflation rate in the country.

Banks are tasked to keep inflation at 2% but the current percentage makes it quite impossible to achieve that.

Mortgage holders are under serious burden. Especially those who are not dealing on fixed rate. Homeowners – a third of adults in the UK – are facing large increases in repayments when fixed-term deals come to an end. First-time buyers are also at risk of being priced out of the market as lending conditions become tighter.

The average two-year fixed rate mortgage on Wednesday hit 6.15%, while five-year deals were 5.79%.

On the other hand UK wages have risen at their fastest rate in 20 years, excluding the pandemic, but are still lagging behind the rate of inflation.

Average Inflation Rate of Europe and US:

Other countries are also facing increase in inflation rate. As a result of this increase, interest rates are also increased. Reasons are almost same, shortage of goods and Covid pandemic.

The annual inflation rate for countries which use the euro was estimated to be 6.1% in May, down from 7% in April.

The European Central Bank has also been increasing interest rates to try to bring eurozone inflation down. Its benchmark rate is now 3.5%, the highest it has been for 22 years.

Inflation has also been falling in the US. It was 4% in the 12 months to May, down from 4.9% in April, the 11th consecutive monthly drop.

The US central bank has increased its key interest rate to 5.25%, up from near 0% a year ago – and the highest level since 2007.

Need of hour is to improve farming sector and increased production of goods.

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