Analysis of High Inflation Rates in the UK: 2021 to Present

This report provides an analysis of the high inflation rates experienced in the UK from 2021 to the present. It begins with an introduction to inflation, defining the concept and exploring its causes, including cost-push and demand-pull inflation. The report then examines inflation at a global level, highlighting factors such as supply chain disruptions, the impact of the COVID-19 pandemic, and the war in Ukraine. It then focuses specifically on the UK, detailing the country's inflation rates, comparing them to those of other G7 nations, and discussing the influence of factors such as energy prices, the Bank of England's policies, and the Consumer Price Index (CPI). The report concludes by summarizing the key findings and providing references to support the analysis. The report covers a range of economic factors and their impact on inflation, offering insights into the complexities of the current economic climate.

High inflation rate in the period
2021-to date
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Table of Contents
Introduction.................................................................................................................................................2
Inflation.......................................................................................................................................................2
Causes of Inflation.......................................................................................................................................2
Inflation at Global levels..............................................................................................................................3
UK Inflation rates.........................................................................................................................................4
Conclusion...................................................................................................................................................5
References...................................................................................................................................................5
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Introduction
The inflation occurred that lead to higher level of prices with certain basic necessities to have negative
impacts in the society. Inflation could occur nearly with services and products that is included in needs
based on food, pricing, utilities and medical care. The inflation is important throughout the economy
that is expected to become overriding concern for consciousness. It is also considered as important
concern in making money that is being saved today and for less valuable tomorrow.
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Inflation
Inflation is the measure that determine the rate of increase of prices of goods and services in the
economy. There are several factors that could drive inflation and drive prices in the economy. This will
also be resulted with the increase in costs of production or increase in demand of services and products.
There is cost push inflation when there is increase due to increases in the production levels. These are
also added to cost of production that are passed on to the consumers in form of higher prices for the
finished goods (Siegel et al., 2021).
Wages would also affect the production cost. When the economy is performing well, there is low rates
of economy with shortages of labor that could occur. If there is increase in wages in order to attract
qualified candidates, this is due to rise in wages of employees. The confidence tends to be higher when
these are leading to increase the spending of the consumers. Companies would also play critical role in
determining the prices of products. The demands from consumers provide corporations with leverage to
raise the prices of products.
Causes of Inflation
There are several causes that consolidate form the inflation and affect the prices of goods and services
over a period of time. These also cause increase in buying power but at the same time high dollars than
paying less in the future (Fountas et al., 2021).
The first cause of inflation happens when the demand of goods and services is higher than the ability of
economy in meeting the demands. When the demand would outpace supply there is pressure upward
on the prices. For example, if there is a love show and number of seats are low, the demands are higher
that are skyrocketed to $2000 when the same costs as low as $140 in off season. The second cause of
inflation is the cost push inflation that determine the increase in the prices when the cost of wages is as
lower. The built-in inflation would occur when there are enough people that are expected to have
inflation to continue in the future.
The housing market also seen ups and downs that is because of economy that is experiencing the
expansion. The home prices would rise that impact products and services to support the housing
industry. The construction products would also see the increase when demanding things higher than
homes. There are expansionary fiscal and monetary policies that could increase the amount of
discretionary incomes for consumers and businesses (Qin et al., 2021).
Inflation at Global levels
There are several reasons why there is increase in inflation at the global levels. The inflation right now is
causing due to the roots of supply and demand-side factors. There are shortages of workers that are
caused by Covid-19. The prices of food and energy are spiked due to invasions of Ukraine. This has
raised the prices of things to unexpected levels. These are caused increase in aspects that are rippled
with economy. There are many countries that have kept large amount of money to companies and to
households at the time of pandemic. The measures of price changes have experienced across the world.
In the year 2021, this rate is large and consistent to increase the impacts and comparing with previous
model of prices. The factors that are contributing to increase the same are the ongoing implications
from Covid-19 and impacts of pandemic and supply chain disruptions.
The trends of prices would continue to increase that are persisted in early 2022. The events are
contributed to increase in exports, imports, consumer prices and exports. There are certain economic
sanctions that are imposed in first quarter and have also impacted the prices of commodity at
worldwide levels.
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As per European Central Bank, the inflation is higher as the prices would go up faster than ever before. It
is because of happening of three big reasons to this that include reopening of economy at fast pace,
higher energy and base effect. There are several restrictions that filled the economy and have also
started travelling the same again. People have also started to travel and going to restaurants again after
avoiding the restrictions of Covid-19. The economies of several countries are at boom that make it
possible to sustain several businesses in future. This will also yield high performance and easy entrance
of things that are considered to be important in long run (INTERNATIONAL MONETARY FUND, 2021).
The outbreak of pandemic has changed the way how people live and work. The consumers would buy
more of certain variety of products for home improvement supplies and electronics. There are
important parts that determine the conductors to suddenly get hard. The companies also do not want to
keep this at pace where people want to buy things. There is also the imbalance between demands and
supplies that would fade away gradually.
The high prices of energy at global levels pushed up the inflation the year 2021 and till date. There are
several factors to it that include prices of energy and growing demands of it. These all factors affect the
prices of the energy and lead to inflation in economy. The prices of gas, oil and electricity matter greatly
for inflation overall. The inflation is also due to higher prices of energy (Faccia et al., 2021).
There are also several measures that would help in comparing the change in prices from one year to the
other. The prices are low at the height of the pandemic and is also driven by the cut in Germany’s sales
tax.
It is expected that inflation will go down in the coming years. The supply would gradually affect with the
anticipation of markets and demands that are getting lower in the coming years. It is also seen that
there are certain measures to inflation that will give rise to sustainability and enhance the performance
in long run. The eyes must be kept on wages as these are influenced by one another and with each
other. The employees are keeping the eyes close to inflation that is getting higher in the coming years. It
is critical to obtain the efficiency in the same.
UK Inflation rates
It has seen that Britain have registered highest rates of inflation since 1980. This is highest among that of
G7 that include UK, US, Germany, Canada, Italy, France and Japan. This has seen the increase in gas and
bills of electricity. The inflation is seeming to highest in G7. The economy is characterized by low
inflation rates for decades and thanks to the ageing population. Britain is also the net imported of
energy in the world. France has also been seen as the 4% cap on the prices of electricity. This has made
the things been achieved more effectively (Wu et al., 2021).
Britain is highly open economy as compared to that of total trade. UK is considered to be the
manufacturing base that is smaller than the country such as Italy or Germany. The disruption in
pandemic is due to pandemic where zero policy is being followed along with China. EU also accounts for
about half of the total imports. These are under the half of food that is produced at domestic levels.
There are estimated post-Brexit barriers that are pushed up with prices of foods. This will also add to the
rate of inflation by driving the costs up for imports.
The unemployment rates have also fallen down to the lowest since 1970. There are number of workers
out there than the number of vacancies that are created. The Bank of England is also believed to
generate inflation that is higher than Britain than in EU. The pay of the same is also soaring the living
costs. The rate of inflation is measured with the measurement of Consumer price Index (CPI). The oil and
gas are greater in demands that got back this to the normal after Covid-19. The war has also reduced the
amount of grain that is been available. The annual rate of inflation for food has been increased to 16.5%
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in November. This has given enough idea of the rates that are been advanced and have caused
sustainability.
The wages are also keeping up with inflation that are increasing at fastest rates after twenty years.
There is also a big rise in the gap that has been seen between people working in private sector and the
one working in public sector. There are wages that should reflect the cost of living and the workers to
strike over the pay. The government also argues that big pays would lead to push the inflation at higher
rates (Ghosh et al., 2021).
In order to tackle inflation, there is need to target it at 2%. The current rate is more than five times of
the same. The borrowings would become more expensive that means that people would have
mortgages to see monthly bills going up. The rate of savings would also increase with this that will count
the subjective decrease in profits. The inflation is caused by several factors such as global energy prices,
action from the Bank of England.
Lower rates of inflation would mean that prices would go down but also means that they would rise
quickly. The prices of Bank would inflate to peak 11% that is reached in October 2022. The inflation
would also keep slowing down in 2023 (Bredin et al., 2021).
The prices of food rose unexpectedly and is highest since 1980’s. This is driving the inflation back to 40-
year high and having pressures on the government to balance the books without getting the help to
form it. This has also pushed the prices that fueled the demands that the government would do more
and to help the families doing the same. This is to regain credibility in the financial markets.
Russia’s invasion would also boost the energy and food prices around the world. The shipments of
natural gas and cooking oil would be disrupted. This has also added to rise in the prices that began as
the global economy. This has also started to recover from the Covid-19 pandemic. There is also the jump
in food costs that have been a biggest bite in Britain since last month. The government has also sought
to shield the consumers to impact the rising energy prices by capping the electricity costs and natural
gas. These also improve the focus on the standards of living of the people there (Bornmann et al., 2021).
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Conclusion
The faster inflation leads to increasing the prices of fuels at faster pace. Bank of England would also raise
rate of interests that will struggle hard with the inflation to 2% target. There is also the meeting that will
make large increase in inflation in the year 2020. In this year 2023, the inflation in UK would come down
in the year 2023. The raising interest rates is considered as tool to bring down the rates of inflation. This
meant that higher borrowing costs would be met with high rate of interests and high rate of loans.
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References
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growth curve approach to model publication numbers from established and new literature databases.
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heteroskedasticity: evidence from European countries. South-Eastern Europe Journal of Economics,
19(2).
Faccia, D., Parker, M. and Stracca, L., 2021. What we know about climate change and inflation. VoxEU.
Org.
Fountas, S., 2001. The relationship between inflation and inflation uncertainty in the UK: 1885–1998.
Economics Letters, 74(1), pp.77-83.
Ghosh, S., 2021. Housing price volatility: uncertainty, an asymmetric econometric analysis–some
European country experiences. International Journal of Housing Markets and Analysis.
INTERNATIONAL MONETARY FUND., 2021. Regional Economic Outlook, October 2021, Middle East and
Central Asia: Trade-Offs Today for Transformation Tomorrow. International Monetary Fund.
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Decentralized Finance. arXiv preprint arXiv:2106.08157.
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investment strategies. McGraw-Hill Education.
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Luescher, T., De Belder, M.A., Deanfield, J.E. and Gale, C.P., 2021. Place and causes of acute
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