Inflation increases for the first time since January

15 July 2020

The Office for National Statistics (ONS) has released data relating to the Consumer Prices Index (CPI) for the UK for June 2020. For the first time in six months, inflation has increased in June, reaching 0.6% after crashing to a four-year low of 0.5% in May 2020.

Back in January, the rate of inflation was 1.8% so there has been a significant decrease, which is attributable to the restrictions imposed by lockdown, as shops, pubs, restaurants and hotels were forced to close, putting a halt to consumer spending. Decreases to the price of food, alcohol and tobacco have stunted further growth over the month of June.

The Bank of England’s target rate of 2% is certainly a long way off, but with the increase in inflation in line with the easing of lockdown restrictions, it is hoped that it will continue to grow over the coming months. Inflation is one of the key areas for consideration for the Bank of England when setting the interest rate, and it is predicted that it will not raise interest rates when inflation is so low, as the aim will be to encourage the public to start spending more in order to boost the economy.

A different set of figures, also released by the ONS, highlight the fact that the economy shrank by 19% over a three month period, when the UK was in lockdown, from March until May 2020.

 


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