British inflation spikes to 4.7 percent in August

LONDON, September 16, 2008 (AFP) – British 12-month inflation hit a fresh 16-year high of 4.7 percent in August on the back of soaring domestic energy bills, official data showed. Britain’s economy experienced zero percent gross domestic product (GDP) growth in the second quarter, which was the country’s weakest performance for 16 years.

Despite the rising cost of goods, the current turmoil on global financial markets could spark an interest rate cut rather than a hike, analysts said.

The rate held above the Bank of England’s 2.0-percent target for the tenth successive month, the Office for National Statistics (ONS) revealed. The reading was higher than market expectations for a rise of 4.6 percent.

Annual inflation had stood at 4.4 percent in July, which had previously been the fastest annual rate since April 1992.

“While the further marked rise in inflation in August dilutes hopes of an interest rate cut before the end of the year, much will depend on just how deep and extended the current financial market turmoil is, and what impact it has on the wider economy,” said Global Insight economist Howard Archer.

World financial markets have taken a heavy knock