The British government does not see the relief on household energy bills as a fall in inflation, official statisticians said on Wednesday, ruling out a slight drop in the rate of price growth, which is at a 40-year low. At its highest level.
Economists and bond investors have looked at whether statisticians would classify the stimulus packages as a cut in consumer prices that would directly reduce the overall rate of inflation and, along with that, the government's debt interest costs stemming from inflation-linked bonds. However, the Office for National Statistics (ONS) has decided that the Energy Bill Support Scheme (EBSS) should be seen as increasing household income rather than reducing household spending.
Read More: How Many People Died From The Corona Virus Worldwide?
"Therefore, the payment will have no impact on the consumer price index, including the consumer price index (CPI), the consumer price index (CPI), or the retail price index (RPI)." the ONS said in a statement.
Economists had widely expected such a decision after the ONS decided to treat government council tax refunds in a similar way during the COVID-19 pandemic.
British consumer price inflation hit a 40-year high of 10.1 percent in July, more than five times the Bank of England's two percent target.
"If the EBSS were to be classified as deflationary, it could push the inflation target to around 0.3%-0.4% over six months," said Philip Shaw, chief economist at the investment bank.
"It is important to note that today's decision has no direct impact on consumers."
Earlier this week, Goldman Sachs said inflation could hit 22 percent early next year if gasoline prices don't fall, though its baseline was 14.8 percent. Read more
EBSS, which was announced in May when energy prices were predicted to be much lower, consists of a £400 ($470) rebate on household bills, paid in installments over six months from October.
The two candidates to become Britain's next prime minister, Foreign Secretary Liz Truss and former Chancellor of the Exchequer Rishi Shankar, have clashed over how to respond to rising energy prices, with Truss initially saying he would "give it a go", preferring to cut taxes instead.
Both opponents acknowledged that the poorest members of society would need help.
The leadership race ends on Monday.
0 Comments