COVID-19: Rate of inflation passes Bank of England 2% target as economy gets back in gear | Business News

The surge in the rate of inflation of the past couple of months showed no sign of slowing in May, hitting 2.1% as the cost of a range of goods picked up following the coronavirus crisis-induced slump for the economy.

Figures from the Office for National Statistics (ONS) showed the annual pace of price growth – as measured by the consumer prices index (CPI) – rose from 1.5% in April.

The pace of the acceleration was faster than economists had predicted, with 1.8% largely expected for May.

The report cited upwards pressure on inflation from transport, motor fuel and eating out costs.

Experts say it is partly a consequence of a pick up in demand but also reflects shortages of raw materials globally because of COVID-19 disruption.

The figures were released following a warning from the Bank of England’s chief economist that the UK needs an inflation spike “like the plague” because a surge in living costs risks inflicting damage on household and business demand.

His boss, governor Andrew Bailey, has defended the wider Bank’s view that the inflation is “transitory” – a “hump” in prices that will soon settle as times return to normal following an unprecedented shock.

The Bank, which has a 2% target for inflation, could raise interest rates from their record low 0.1% to counter price rises though higher borrowing costs could dampen the shaky recovery.

It is a monetary policy debate that is set to intensify following the latest figures.

Sky News

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