The UK’s Office for National Statistics (ONS) disclosed the CPI figures in a Sept. 15 release, in which the agency said the inflationary spike is likely temporary, driven up mostly by base effects due to the government’s “Eat Out to Help Out” program combined with reductions in value added taxes that sharply discounted prices in the restaurant sector in August 2020.
The British agency said that the contribution of restaurants and hotels to the headline CPI number was the largest ever in the history of the series.
“In August 2020 many prices in restaurants and cafes were discounted because of the government’s Eat Out to Help Out (EOHO) scheme, which offered customers half-price food and drink to eat or drink in (up to the value of £10) between Mondays and Wednesdays,” ONS said in a statement.
“Because EOHO was a short-term scheme, the upward shift in the August 2021 12-month inflation rate is likely to be temporary,” the agency added.
The last time the 3.2 percent headline over-the-year CPI number came in at a comparable level was in March 2012, when the gauge vaulted 3.5 percent, the data show.
ONS noted that the 1.2 percent rise in the over-the-year CPI figure to 3.2 percent from 2.0 percent in the 12 months through July was the largest ever jump in the 24-year history of the series.
The August reading is well above the UK central bank’s target of 2 percent and is likely to reinforce calls for a rollback of pandemic-era stimulus measures.
“Higher inflation will inevitably raise questions for the Bank of England on the timing of tightening monetary policy and interest rate hikes to contain inflationary risks further down the line,” Yael Selfin, chief economist at KPMG UK, told Reuters.
“However, any tightening now risks scuppering the recovery before it has a chance to take hold, so a delay until the middle of next year is likely,” he added.
On a month-over-month basis, CPI rose 0.7 percent from July to August after staying flat from June to July.
British Health Secretary Sajid Javid, a former finance minister, said Wednesday he thought the inflationary jump was likely temporary though it warrants close observation for potential policy moves.
“My view is I think it is probably a temporary increase,” Javid told BBC radio. “We are globally seeing an increase in inflation and that is something that, for any government, they’re going to have to take account into future spending plans.”
“Keeping an eye on inflation makes a lot of sense,” he added.
In the United States, the comparable CPI inflation gauge inched down to 5.3 percent in the 12 months through August, which is 0.1 percentage points lower than both the June and July figure, which reflected the highest spike in the measure in 13 years.
Reuters contributed to this report.