Cairo- The Office for National Statistics (ONS) announced on Tuesday that inflation in Britain has hit its highest level in nearly two years. The announcement comes while the United Kingdom prepares for Brexit.
Meanwhile, the tumbling of British Pound is spreading fears from raising the prices of imported materials and goods.
The ONS said consumer price inflation rose to 1% in the year through September, yet it was still higher than the annual inflation in August, which rose to 0.6%.
However, that’s still just half the Bank of England’s target, the pound’s dramatic slide since the U.K. voted to leave the European Union is promising to fuel a rapid pickup.
This inflation is considered a real test for Mark Carney’s tolerance. The fallout from sterling has already been felt in the economy, thus leaving Governor Carney with a tough decision on whether it’s the right time for more easing.
The weaker pound and more expensive oil are already driving up producer prices, with the cost of goods leaving factories rising the fastest in three years. The U.K.’s statistics office said the increases can be “partly attributed to the changes in the sterling exchange rate.”
The pound was at $1.2292 at 1:37 p.m. in London, having fallen to a 31-year low earlier this month. U.S. consumer prices rose at the fastest pace in five months in September, according to a separate report on Tuesday.
Bank of England has already pumped stimulus into the economy since the Brexit vote, cutting interest rates in August for the first time in seven years and restarting quantitative easing.
ONS said there was nothing, yet, to suggest widespread pressure on prices from sterling’s decline, which makes imported goods more expensive.
It pointed to fuel prices rising at a faster pace in September compared with the same month a year ago. Gas costs were largely unchanged but had been falling in September 2015.
For his part, Head of Inflation at the ONS Mike Prestwood said: “The prices paid by manufacturers for raw materials were unchanged over the month and there is no explicit evidence the lower pound is pushing up the prices of everyday consumer goods.”