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Data Bite - Annual CPI Inflation September 2021

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17 09 21 Annual CPI Inflation September 2021

What:

Annual inflation as measured by CPI rose to 3.2% in August and has now been at or above the Bank of England’s inflation 2% target for four consecutive months.

The ONS reports that base effects linked to the Eat Out to Help Out scheme and, to a lesser extent, VAT reductions were the largest contributors to higher inflation.

However, prices also rose across other categories. Second-hand car inflation rose from 14.3% in July to 18.3% in August, while hotel price inflation rose from 5.7% to 11.6%.

Why:

With utility prices set to rise sharply in October and ongoing component shortages and supply chain bottlenecks, inflation will remain comfortably above the BoE’s target in the short term.

The BoE will closely monitor inflation and labour market figures to assess the need for higher interest rates. Oxford Economics and Capital Economics both believe that interest rates will remain at their current levels until 2023, while HSBC is pencilling in a first rise in 2022.

Higher interest rates would in theory not only encourage consumers to save more, but it would also raise debt servicing costs and mortgage rates, both of which could act as breaks to the economic recovery.


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Data Bite - Annual CPI Inflation September 2021

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