In August, the UK’s annual inflation jumped from 2% to 3.2%.
U.K. inflation jumped from 2% to 3.2%
– the biggest recorded increase ever!But don’t worry, it’s “transitory”#Bitcoin 😉
— Bitcoin Archive (@BTC_Archive) September 15, 2021
This would be the biggest single monthly jump in UK inflation ever.
Summary
Inflation in UK, anomalous data
Inflation had already risen to 2.5% in June, with a drop to 2% in July. This drop turned out to be decidedly anomalous, so much so that in August it rose to an annual 3.2%.
In March it was below 0.8%, but from April onwards it rose first to over 1.5% and then in May to over 2%.
In this progression, the July figure seems really anomalous, i.e. too low compared to the previous month and the following month, which is perhaps why August saw this huge jump in a single month.
Comparing August’s 3.2% with June’s 2.5%, in two months the increase was not record-breaking, so it is possible that the real record in the last month is due to some anomaly.
Back at the end of 2017, UK inflation had momentarily exceeded 3%, so the single August figure is not anomalous either. The only real oddity lies in the monthly increase.
Between 2009 and 2012, at the height of the sovereign debt crisis, it had risen by as much as 5%, again probably due to the expansive monetary policy of the British central bank, the BoE, which even now is continuing to create GBP out of thin air and place it on the markets.
The central bank itself, and government authorities, claim that this relatively high level of inflation is only temporary, and that everything will return to normal in the coming months.
The BoE continues to inject sterling into the market
Many are sceptical about this assumption, which is often considered overly optimistic.
In the recent past, UK inflation remained almost consistently above the 2% target for around eight years, although the two peaks at 5% lasted only a very few months. Even between 2017 and 2018, it was above the desired 2% threshold, and practically stayed there for two years.
Given that the BoE is continuing to inject pounds into the markets, the possibility that such a relatively high level of inflation could actually last for several months, if not years, cannot be dismissed at all.
As we cannot see the start of tapering any time soon, it seems very unlikely that it will be back below 2% by the end of the year, and could remain above this threshold even for 2022.
