Prices in the UK rose 8.7 per cent in the year to April, higher than the 8.2 per cent forecast by the Bank of England and nearly double the US rate. In the Eurozone, inflation slowed from 7 to 6.1 per cent in May. There are a few reasons for this example of Great British exceptionalism, the blindingly obvious being Brexit. Larry Summers described it as an “historic economic error” and a recent study by LSE found it accounted for a third of the increase in food bills for households since 2019, equivalent to about £250. Britain’s heavy reliance on natural gas for heating and a nascent wage-price spiral are also to blame – both issues that won’t be fixed tomorrow. For now, the UK will have to continue taking the unwelcome medicine of raising rates, which some economists are predicting will peak at 5.5 per cent next year. UK lenders pulled nearly 800 mortgage deals from the market this week in response.
