What is the effect of the pandemic on the United Kingdom’s inflation rates?

Even long-time crypto skeptics have recently been changing their minds. With the rising concerns about the future of economies and the inflation at the door, cryptocurrencies could be treated as a hedge. And so is gold, which features are seemingly being rediscovered (once again).

Jerome Powell, who is the Federal Reserve Chairman recently gave an interview, where he described the current economic state as being at the point of inflection. This could potentially mean the silence before the storm. Because the vaccine rollout is still the number one priority, the inflation (fueled by governments’ aid and money pumped into the economy) is currently held at bay, but there is not a lot of time left until it’ll arrive at the harbor.

Of course, there are concerns about whether central banks (Bank of England being one of them) are equipped and skilled enough to deal with the upcoming crisis. But it was rather surprising, that in February the inflation rate fell to 0.4%. This was well below the Bank of England target rate of 2%. But of course, since then a lot has changed, and the inflation rates went flying in the whole world. The United Kingdom is holding relatively strong, as the inflation still hasn’t reached the 2% (although it’s close). At least is holding better than a lot of others.

The inflation during the pandemic

So what was the inflation rate before it fell (and was a success) to 0.4% in February? In December, it was 0.6%, then rose to 0.7% in January. This increase was the result of the prices of food and household goods going up, and the cutting down of a lot of discounts.

Later, clothing retailers and dealers of used cars have encouraged society to spend more, by offering them big discounts. That is where the mentioned decrease came from. To find out more about the complicated mechanisms of inflation and the case study of the UK, visit the following Disruption Banking piece: https://disruptionbanking.com/2021/04/12/how-did-the-pandemic-affect-inflation-rates-in-the-uk/.


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