UK inflation hits 4-year low on virus lockdown

Agence France-Presse
UK inflation hits 4-year low on virus lockdown

AFP

Britain's inflation rate slumps to 0.5% in May 2020 despite a rebound in oil prices

LONDON, United Kingdom – Britain’s annual inflation rate slid to 0.5% in May, the lowest level in 4 years, as the country’s coronavirus lockdown dampens prices, official data showed on Wednesday, June 17.

Analysts said the data, along with recent figures showing a surge in United Kingdom unemployment and a massive contraction in the country’s economic output, meant the Bank of England (BoE) was certain to pump billions more pounds into the economy under so-called quantitative easing (QE).

The Consumer Prices Index (CPI) annual inflation rate slumped to 0.5% last month from 0.8% in April, the Office for National Statistics (ONS) said in a statement on Wednesday.

The CPI rate stood at 1.5% in March and at 2% in May 2019 and the last time it had stood at 0.5% was in June 2016.

Inflation continued to slide last month despite a rebound in oil prices.

“Global prices for crude oil fell sharply from the beginning of 2020 before recovering throughout May, albeit to levels well below the start of the year,” the ONS noted. 

“Within the UK, those rises were not seen at the [petrol] pumps as the coronavirus lockdown continued.”

Another factor behind the slowdown in inflation was a cut in retail prices for recreational items.

“The cost of games and toys fell back from last month’s rises while there was a continued drop in prices at the pump in May, following the huge crude price falls seen in recent months,” said ONS statistician Jonathan Athow.

Britain’s lockdown is easing, with non-essential shops including clothes stores reopening this week after most were ordered to shut from the final week of March.

The country’s economy has crashed spectacularly as a result of COVID-19, shrinking by one-fifth in size during April.

Official data on Tuesday, June 16, meanwhile showed that UK jobless claims more than doubled to 2.8 million people at the height of the country’s outbreak, or 3 months to the end of May.

The BoE has warned that the economic paralysis could lead to Britain’s worst recession in centuries.

The BoE has reacted by slashing its main interest rate to a record-low 0.1% and pumping £200 billion ($247 billion, 220 billion euros) into the economy to get retail banks lending to fragile businesses.

“The Bank of England will tomorrow almost certainly announce more QE, likely increasing…by at least £100 billion,” said Neil Wilson, chief market analyst at Markets.com. 

“Numbers yesterday pointed to a looming unemployment crisis in the UK.”

The BoE will on Thursday, June 18, unveil its latest monetary policy decisions following a regular meeting held this week. – Rappler.com

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