Why UK Inflation Is So High and Tough to Bring Down

While a post-pandemic burst of inflation has abated across much of the developed world, Britain is still stuck with the highest price growth among Group of Seven economies. The Bank of England has responded with the most rapid series of interest rate rises in a generation, worsening a cost-of-living crisis. Here’s how we got here, and whether there’s any relief in sight.

Britain’s inflation rate surged when economies emerged from the coronavirus pandemic as people spent money they’d saved during lockdowns, companies struggled to meet the resulting jump in demand and energy prices soared. In the UK, the Consumer Prices Index peaked at 11.1% in October and fell back to 6.8% in July — exceeding the expectations of economists for the fifth time in six months. Core inflation, which excludes volatile energy and food prices, also has been slow to decline from a 30-year high and is more than triple the BOE’s 2% target. By comparison, July inflation was 3.2% in the US and 5.3% in the euro area.