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Inflation remains stubbornly high above 10%

Geoff Riley

20th April 2023

Hopes that the annualise rate of inflation might dip below 10% have been dashed for the moment. The rate of inflation will come down - economists use disinflation for this effect - but if we dig beneath the surface we find that food prices are rising at their fastest rate for 45 years. And claims of "greedflation" as some businesses take advantage of confusion over the cost-of-living crisis are becoming more frequent and hard to ignore.

Food prices rising at their fastest for 45 years

Inflation has fallen but continues to stay high, with last month's figure of 10.1% exceeding expectations. The issue is that food prices remain stubbornly high, with food price inflation at a 45-year high. Without this falling, the cost of living crisis looks set to continue.

Please read: UK inflation: Supermarkets say price rises will ease soon

Cost of British food basics increases by up to 80% in a year

Consumer magazine Which? has conducted a survey to highlight the extent to which basic items in Britain's supermarkets have increased, and implicit in this is a indication of the distributional consequences of inflation.

With basic items going up by up to 80% it would seem to be the case that the poorest in society, presumably most likely to buy these goods, have seen inflation as it affects them rising more quickly than anyone else.

Please read: Cost of British food basics increases by up to 80% in a year

Is greedflation to blame?

Larry Elliott is of the view that the reason that inflation is proving so stubborn, is nothing to do with food price inflation, but more to do with corporate greed, and firms using an inflationary environment to engage in price gouging, and boosting their profits - so-called greedflation.

It is an interesting read, not least because it dispels the myth that it's a wage-price spiral driving inflationary pressure.

Please read: This isn’t wage-price inflation, it’s greedflation – and big companies are to blame

Will monetary policy interest rates have to rise further?

Phillip Inman is of the view that the latest inflation data is going to make the MPC more likely to raise interest rates. With inflation remaining stubbornly above 10%, it might be that those members of the MPC who were vacillating, might be induced into supporting a further rate rise.

Please read: Inflation surprise makes Bank of England rate rise almost a certainty

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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