The United Kingdom is approaching double-digit inflation

Inflation in the UK is likely to hit a four-decade high of more than 9% in May, underscoring the challenge for the Bank of England as it threatens faster interest rate hikes in response.

A week after the US consumer price spike triggered a 75 basis point increase by the US Federal Reserve amid spasms in global financial markets, the British data will offer investors another chance to wonder if the reaction of the players policy is sufficient.

While economists’ average inflation forecast for Wednesday forecasts an increase of 9.1%, an estimate – by Natixis SA – indicates a result of 10%. The BOE estimates that the peak later this year will be “slightly above” 11%.

The forecast accompanied last week’s decision by officials led by Governor Andrew Bailey to raise interest rates for a fifth straight meeting by a quarter of a unit, signaling that a larger move could be made if needed to bring it under control. inflation.

The BOE also warned that the economy could shrink in the second quarter, an analysis that this week’s reports could help validate. Economists ‘forecasts show that retail sales are likely to fall 0.7% in May, while market managers’ surveys are expected to reveal a further slowdown in both manufacturing and services.

Investors will also scrutinize the reaction of policymakers to this data, with at least seven such appearances scheduled this week, including two by chief economist Huw Pill. The deteriorating economic news will fuel the political debate over whether the government of Prime Minister Boris Johnson is doing enough to ease the cost-of-living crisis.

As controversy rages over whether Brexit is to blame, two special elections will be held on Thursday – the sixth anniversary of Britain’s vote to leave the European Union – where people in the North and South West of England will be able to vote. to share their views at the ballot box.