UK inflation hits new 40-year high: Top economics stories to read this week

Plastic letters arranged to spell 'inflation' are placed on British banknote in this illustration taken on 12 June 2022. REUTERS/Dado Ruvic/Illustration

UK inflation hit 9.1% in May. Image: REUTERS/Dado Ruvic/Illustration

Joe Myers
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  • This weekly wrapper brings you the latest stories from the world of economics and finance.
  • Top economy stories: UK inflation hits new 40-year high; Economists predict more US rate rises; Swiss National Bank makes surprise increase to interest rates.

Economics stories from around the globe

Many of Wall Street's biggest banks have raised their forecasts for a US recession after the Federal Reserve increased interest rates to fight spiralling inflation.

The revival of Pakistan's International Monetary Fund bailout programme moved a step closer after key progress in talks, both sides said on 22 June. Islamabad expects the lender to increase the size and duration of the 39-month, $6 billion facility.

The Swiss National Bank made a surprise move to raise its policy interest rate last Thursday – the first time it has done so in 15 years. The rate increased from -0.75% to -0.25% and the bank indicated it is ready to hike rates further.

Finland's economic growth will come close to a halt next year while inflation is set to stay high as a result of Russia's war on Ukraine, the Bank of Finland says.

A Bloomberg Survey suggests that Australia's economy will grow at a slower than previously expected pace in 2022 and 2023.

Singapore's core consumer price index has hit its highest level in almost 14 years.

United Airlines expects fuel prices to stay high in the long term, its chief executive said on 20 June. Based on current prices, its fuel bill will total $12 billion this year, Scott Kirby told reporters in Doha.

Have you read?

More Federal Reserve rate rises: Reuters poll

Most economists expect the US Federal Reserve to raise interest rates by another 0.75 percentage points in July, with a 0.5 percentage point increase in September, according to a poll by Reuters.

It comes after the Fed raised rates by 0.75 percentage points last week – the biggest increase since 1994.

The results of the poll, conducted on 17-21 June, show momentum is still behind the US central bank doing more, not less, despite rising recession concerns and a steep sell-off in financial markets. Of the 91 economists surveyed, 67 expect another 0.75 percentage point rate hike.

Fed Chair Jerome Powell told a US Senate hearing yesterday that the central bank is not trying to engineer a recession to stop inflation, but is committed to bringing prices under control. "We are not trying to provoke, and I don't think we will need to provoke, a recession," Powell said.

US stocks rose following Powell's remarks but ended Wednesday slightly down.

Reuters Poll: US economy and Federal fund rate outlook
Reuters Poll: US economy and Federal fund rate outlook. Image: Reuters

UK inflation hits a fresh four-decade high

UK inflation reached a new four-decade high in May, with increases in prices for a broad range of goods, from fuel to food and beverages.

The Office for National Statistics (ONS) reported a year-on-year rise in its consumer price index of 9.1%, up from 9% in April.

It means the figure has reached its highest since March 1982, when it hit 10.2%, reported the BBC. The prices of goods leaving factories rose at their fastest rate in nearly half a century in May, ONS Chief Economist Grant Fitzner said.

Contributions from housing and household services, and transport, account for around half of the CPI annual rate
Housing and household services plus transport account for around half of the CPI annual rate. Image: Office for National Statistics

Some economics research to read this week

Brexit could leave the average worker in the UK £470 ($577) a year poorer, according to a new study by a London School of Economics associate professor.

New research from the Federal Reserve Bank of San Francisco suggests that supply constraints have accounted for around half of the surge in US inflation.

Research by a team of economists has shown the potential impact of climate change and biodiversity loss on government finances.

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Geo-economicsFinancial and Monetary Systems
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IMF says global economy 'remains remarkably resilient', and other economics news

Joe Myers

April 19, 2024

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