UK inflation jumped to a three-year high in June, driven by price increases in clothes and second-hand cars

UK reopening coronavirus shopping
Clothing prices rose in June after UK stores reopened.

Prices across the UK economy rose at the fastest rate in three years in June, official data released Wednesday showed, as Brits spent on clothes and meals out as the economy reopened.

The UK consumer prices index rose 2.5% in the year to June 2021, from 2.1% in May. It was the highest reading since August 2018 and above economists’ expectations for a 2.2% increase.

Britain’s Office for National Statistics said prices rose in particular for food, second-hand cars and clothing in the year to June, as well as for eating and drinking out and motor fuel.

“Some of the increase is from temporary effects, for example rising fuel prices which continue to increase inflation, but much of this is due to prices recovering from lows earlier in the pandemic,” Jonathan Athow, deputy national statistician at the ONS, said.

When looked at month-on-month, CPI inflation rose 0.5% in June 2021 compared to 0.6% in May.

The pound was up 0.3% after the figures were released at $1.385, while London’s FTSE 100 was fell 0.44% at the open. Yields on 2-year government bonds rose 2 basis points on the day to 0.12%, nearing their highest in three weeks.

Read more: BlackRock unpacks how it’s investing in global stocks from the US to China in the 2nd half of 2021 – and why it remains ‘pro-risk’ in a higher-inflation environment

The stronger-than-expected inflation figures pose a challenge for the Bank of England which, like many central banks around the world, has insisted strong inflation will be temporary.

On Tuesday, data showed US inflation rose by more than anticipated to a 13-year high in June, with prices across the economy jumping 5.4% year-on-year.

Paul Dales, chief UK economist at Capital Economics, said June’s UK inflation figures came as a surprise. But he added: “We think this surge in inflation will be temporary, which means the Bank of England won’t tighten policy in response.”

Dales said: “We suspect CPI inflation could climb towards 4% around the turn of the year, which would be higher than the 3% peak expected by the Bank and most forecasters.

“But this will probably be a temporary spike related to reopening effects and the previous gains in commodity and component costs. As such, we are not expecting the Bank to respond by tightening policy in either 2021 or 2022, and probably not 2023 too.”

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Tumbling lumber prices are a sign that strong inflation will be temporary, Bank of England boss says

Lumber prices sawmill US logs wood
Lumber prices plummeted in June.

  • The plunge in lumber prices is a sign strong inflation should fade, the Bank of England’s governor said.
  • Andrew Bailey is among the central bankers to argue that inflationary pressures should be temporary.
  • Lumber prices soared but then tumbled 45% in June as sawmills upped production and demand slipped.
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The dramatic fall in lumber prices in the last month is a sign that strong inflation will be temporary, the governor of the Bank of England said on Thursday.

Lumber futures soared in the first few months of the year before dropping more than 40% in June. Prices peaked at more than $1,670 per thousand board feet of lumber in early May, but have since plummeted to around $760.

The drop is a sign that pandemic-driven booms in certain sectors will wear off as economies rebalance and supply catches up with demand, Bank of England Governor Andrew Bailey said in a speech on Thursday.

“We are seeing rebounds and normalisation of some commodity prices,” Bailey said. “In the US, lumber prices having risen sharply, are now retracting a sizeable part of that rise.”

“There are plenty of stories of supply chain constraints on commodities and transport bottlenecks, much of which ought to be temporary.”

Read more: An ex-Goldman trader breaks down why he is ‘salivating’ to buy the dip in grain stocks – and shares 5 stocks and an ETF to play the commodity supercycle

In the UK, year-on-year inflation jumped to a two-year high of 2.1% in May. In the US, year-on-year inflation hit a 13-year high of 5% in the same month.

But both Bank of England – the UK’s central bank – and the Federal Reserve argue that sharp price rises are a result of strong growth and bottlenecks in certain sectors. They say inflation will cool as growth slows, businesses adapt and people’s eagerness to spend wanes.

In the lumber market, analysts say prices are tumbling because people are spending less on home improvements as restrictions are lifted. Meanwhile, lumber producers have increased their supply.

However, not all analysts agree that falling prices in some sectors mean inflation will be temporary.

Hugh Gimber, global market strategist at JPMorgan Asset Management, said rising wages across economies as firms rehire workers could cause prices to rise more than expected.

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The Bank of England says it expects inflation to surge above 3%, but keeps its $1.25 trillion bond-buying target for now

Bank of England
The Bank of England is the UK’s central bank.

The Bank of England said it now expects UK inflation to surge above 3%, but nonetheless maintained its bond-buying target at $1.25 trillion, saying it still believed sharp price rises will be temporary.

Departing chief economist Andy Haldane was the only one of nine monetary policy committee (MPC) members to vote against the plans. Raising concerns that strong inflation may stick around, he voted to cut the bond-buying package by 50 billion pounds ($70 billion).

The Bank also decided to keep its main interest rate at the record-low level of 0.1%, in a unanimous vote, on top of 8-1 decision to keep the bond-buying package steady at 895 billion pounds ($1.25 trillion).

The pound fell after the announcement, and was around 0.25% lower against the dollar at $1.393.

UK inflation jumped 2.1% in May year-on-year, the biggest rise since July 2019 and above the Bank of England 2% target. It was a bigger rise than the central bank had expected.

The Bank said on Thursday that it now expects inflation to jump above 3% for a temporary period, “owing primarily to developments in energy and other commodity prices.” In May, it had only expected inflation to rise temporarily above 2%.

Yet the Bank’s MPC said it expects inflation to fall back again as commodities price rises fade. However, it said there are “risks around this central path, and it is possible that near-term upward pressure on prices could prove somewhat larger than expected.”

Central banks around the world are dealing with stronger inflation than has been seen for decades, as economies rebound sharply from the COVID-19 slump. Too much inflation is seen as disruptive for economies, and central banks try to keep it at around 2%.

In the US, where year-on-year inflation hit 5% in May, the Federal Reserve has signalled a slight shift in its expectations for monetary policy. Officials now predict the central bank will raise rates in 2023, according to “dot plot” estimates released last week.

Paul Dales, chief UK economist at consultancy Capital Economics, said: “Other than the MPC noting the growing upside risks to inflation at today’s policy meeting, there were no real signs that it is thinking about tightening policy sooner, à la the Fed.

“We think policy will be tightened much later than the mid-2022 date the markets have assumed.”

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US futures rise ahead of jobless claims and Fed speeches, while oil extends rally as outlook brightens

A trader works at the New York Stock Exchange (NYSE) in New York, U.S., February 4, 2020. REUTERS/Bryan R Smith
A trader works at the New York Stock Exchange

US stock index futures climbed on Thursday as investors awaited the release of weekly jobless claims data and prepared to digest a series of speeches from Federal Reserve officials.

Meanwhile, oil prices extended their rally as the outlook for the global economy brightened, with vaccine rollouts spurring expectations of strong demand for energy in the coming months. Oil is on course for a third straight monthly gain in June.

In Europe, stocks rose ahead of the Bank of England’s interest rate decision. It is expected to leave monetary policy on hold but investors will scrutinize the decision for signs of concerns about inflation, which jumped above the Bank’s 2% target in May.

Futures for the US benchmark S&P 500 rose 0.41%, after the index slipped slightly on Wednesday. Dow Jones futures climbed 0.4% while Nasdaq 100 futures gained 0.54%.

Europe’s Stoxx 600 rose 0.59% in early European trading, while London’s FTSE 100 was 0.2% higher. China’s CSI 300 climbed 0.17% overnight while Japan’s Nikkei 225 was flat.

Investors awaited US jobless claims data on Thursday, after a quiet week on the economics front. Economists expect weekly initial jobless claims to drop below 400,000, after a surprise rise to 412,000 the previous week.

John Williams, the President of the New York Fed, and Raphael Bostic, Atlanta Fed President, are among the key central bank officials making public comments on Thursday. Investors will parse their words for any hints about the future direction of US monetary policy.

On Wednesday, Dallas Fed President Robert Kaplan said he thought the central bank would have to start cutting back its support sooner than people expected, moving markets somewhat.

“As we make substantial further progress… I think we’d be far better off, from a risk-management point of view, beginning to adjust these purchases of Treasuries,” he told Bloomberg.

The yield on the key 10-year US Treasury note climbed 1.3 basis points to 1.5% on Thursday. The dollar index slipped 0.08% to 91.73.

Jeffrey Halley, senior market analyst at currency group Oanda, said the light economic calendar means “we will remain at the mercy of Fed-speak and a schizophrenic intra-day market.”

However, investors will get a clearer sense of what global central banks are thinking about inflation and their support packages when the Bank of England makes its interest rate decision at 7.00 a.m. ET.

Elsewhere in markets, oil prices extended their rally. Brent crude rose 0.6% to $75.64 a barrel while WTI crude climbed 0.53% to $73.47.

Prices have risen by almost a quarter in the last three months, as the outlook for the global economy has brightened, and investors feel secure that the OPEC+ group of oil producing countries will closely manage supply.

Bitcoin’s recovery – which saw the price rise above $34,000 on Wednesday and dropping below $30,000 a day earlier – ran into trouble. The cryptocurrency was down 0.4% on Thursday at $32,913.

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UK inflation unexpectedly surges to 2.1% in May as Brits splurge after lockdown – and economists think prices have further to rise

UK woman shopping shops red bus economy reopens London
Rising clothes prices helped push up inflation in May after non-essential stores reopened.

  • UK inflation unexpectedly jumped to 2.1% in May as the economy reopened, data showed Wednesday.
  • The reading was above analysts’ expectations and higher than the Bank of England’s 2% target.
  • Economists say prices have further to rise as more restrictions are lifted, at least in the short term.
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UK inflation shot up by 2.1% in May, more than economists were expecting and above the Bank of England’s target of 2%, as the reopening of the economy pushed up the cost of fuel, clothing, and meals out.

The 2.1% year-on-year increase was the biggest since July 2019, the Office for National Statistics said Wednesday, and compared with an increase of 1.5% in April.

Core inflation – which strips out volatile categories like food and energy – climbed 2% year-on-year, the most since August 2018.

The pound rose after the data was released, and traded 0.23% higher against the dollar at $1.411. Britain’s FTSE 100 stock index was up 0.27% in early trading.

The ONS said the rise in inflation in May was led by fuel prices. Part of the increase was due to so-called base effects, given that energy prices fell sharply in May 2020, the comparative month.

But clothing prices also added upward pressure as stores reopened and cut back on discounting. Meals and drinks consumed at pubs and restaurants also became more expensive after they were allowed to resume business in April.

The UK economy is gradually opening up again after the strict coronavirus lockdowns put in place in the winter.

May’s inflation data was collected before the English government loosened restrictions further in the middle of the month, said Samuel Tombs, chief UK economist at Pantheon Macroeconomics. That means “we likely will see a further, broader-based recovery in services inflation in June’s data.”

He added: “Looking ahead, we expect [consumer price index] inflation to peak at about 2.8% towards the end of this year.”

Such a rise would be well above the Bank of England’s 2% target, potentially putting pressure on the central bank to pull back on its support for the economy.

However, like the Federal Reserve in the US and European Central Bank in the eurozone, the BoE thinks strong rises in inflation will be a temporary feature of the reopening of economies.

Hannah Audino, economist at PwC, said: “We expect the Bank of England to see through the recent rise in inflation and continue to prioritize supporting the recovery with low interest rates, over reducing inflation.”

“It is important to interpret the latest data in the context of the low prices we saw 12 months ago during the pandemic,” Audino said. “This means that so-called ‘base effects’ are driving up the rate of inflation, and will likely do so for a few more months.”

Willem Sels, chief investment officer at HSBC’s private bank, said: “Although UK CPI may now further overshoot the Bank of England’s 2% target, we still think it will come down again to around 2% in 2022.”

Signs that inflationary pressures are building came in the latest readings on UK producer price inflation, also released Wednesday. Prices of manufactured goods increased by 4.6% in May year-on-year, compared with 4% in April, the ONS said. Meanwhile, costs for UK producers jumped 10.7%, the highest rate of growth for input prices since September 2011.

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‘Britcoin’ may soon be a reality after the Bank of England says it is looking more deeply into a digital pound

A close-up of a replica bitcion is seen with a British flag
A close-up of a replica bitcoin is seen with a British flag

  • The Bank of England said it would look more closely at launching its own digital currency.
  • There no decision yet on “Britcoin,” but a digital currency would complement, not replace, banknotes, it said.
  • One possible scenario is one-fifth of all UK retail bank deposits are in a new form of digital money.
  • See more stories on Insider’s business page.

The Bank of England is going to look more closely at launching its own digital currency, although it is still to make a decision on whether to introduce one.

The BoE on Monday released a discussion paper seeking response to its thoughts on a central-bank digital currency, which it put forward last year, as it believes it should “at the very least, be carefully studying CBDCs,” it said.

“The Bank of England has not made a decision on whether to introduce CBDC, but is committed to engaging widely on the benefits, risks and practicalities of doing so,” it said in a statement. “The Bank now intends to deepen its exploration of CBDC.”

CBDCs are effectively cryptocurrencies that are pegged to a national currency and controlled by the central bank. They operate as “stablecoins” – a digital token whose value is pegged to an underlying asset. The key difference between a stablecoin and a CBDC is the former is controlled by a private-sector entity.

Interest in digital currencies among central banks is picking up, as investors big and small jump onto the cryptocurrency bandwagon. Virtually every cryptocurrency, from bitcoin to ether, has hit record highs this year.

China is already running trials of its digital yuan, while the Federal Reserve plans to release a discussion paper in the coming weeks about its thoughts on digital payments. Jon Cunliffe, the BoE’s deputy governor, said last month it was “probable” the central bank would launch its own digital currency, which market watchers have nicknamed “Britcoin”.

“A CBDC could contribute to a more resilient, innovative and competitive payment system, but it would also raise significant questions for the economy and financial system,” Cunliffe said in Monday’s statement.

“The Bank has not yet made a decision on whether to introduce a CBDC. Were it to do so, any CBDC would complement, rather than replace, banknotes,” he added.

In its paper, the BoE laid out a scenario to illustrate what might be the demand for alternative means of payment. Under its model, it estimates 20% of all UK retail deposits will be in new forms of digital money.

“In the illustrative example, a fifth of all UK retail deposits transfer to new forms of digital money. Factors such as convenience, trust, and perceived safety are assumed to play a key role in determining demand for new forms of digital money,” it said.

The central bank plans to join forces with the UK’s finance ministry, the Treasury, to explore the public-policy issues around a CBDC, in order to look more closely into the potential launch of a digital currency. Any CBDC could only be harnessed if it is widely used and easily accessible to a broad range of groups in society, it said.

In addition to respecting users’ privacy, any CBDC would comply with the rules around money laundering or financing crime that exist for current digital payment systems.

Crucially, any CBDC should not interfere with the BoE’s ability to manage monetary policy and ensure financial stability. “For example, the Bank will carefully consider any risks associated with the outflow of deposits from the commercial banking sector,” the BoE said in the paper.

The central bank stressed in the paper that it supports efforts to improve payments in the UK, where these are safe, viable and well understood.

“A CBDC should only be introduced if it adds sufficient value and delivers net benefits, and if launched, should be designed to co-exist with other payments innovations. When exploring CBDC, the Bank will also give full recognition to the potential of private sector alternatives to deliver the outcomes sought,” it said.

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Central banks aren’t running scared of bitcoin but they want to keep control, says former Bank of England digital guru

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The Bank of England is looking into launching a “Britcoin.”

  • Central banks are increasingly interested in creating digital currencies as the use of cash falls.
  • But central banks aren’t threatened by bitcoin, says former Bank of England advisor Huw van Steenis.
  • The top banker spoke to Insider and punctured some central bank digital currency myths.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

In some ways, central bankers are like the “bitcoin bros” who have sent cryptocurrencies soaring in 2021, although they might not like to think it.

While crypto fans have taken to Twitter to shout about their gains, there’s been a quieter – but no less important – surge in interest in digital currencies in the hushed offices of the world’s central banks.

The Bank of England is weighing up launching a “Britcoin”; China is racing ahead with trials of its digital yuan; and European Central Bankers are giving speech after speech on central bank digital currencies, or CBDCs. The Federal Reserve is taking things more slowly but has enlisted MIT researchers to explore the issue.

Huw van Steenis was formerly a top advisor to the governor of the Bank of England and is now senior advisor to the CEO of Swiss banking giant UBS.

A well-known figure in the City of London, he wrote the Bank of England’s 2019 future of finance report, which looked hard at the outlook for payments and the pros and cons of central bank digital currencies.

Van Steenis is clear-eyed about CBDCs, arguing that they sometimes seem like “a solution in search of a problem.” But he told Insider they are definitely about central banks keeping control of money.

A CBDC would be a digital version of banknotes and coins, letting people hold and make payments in central bank money. At the moment, the digital money people use every day is created by commercial banks and held in accounts or on pre-paid cards.

Central bankers are watching cryptocurrencies closely

Some analysts have argued that central banks have been spurred to action by the crypto boom, and fears that bitcoin could become a global payments system. Bank of America researchers posited in March that CBDCs could be “kryptonite for crypto.”

Van Steenis thinks differently. “Approximately 95% of the money in most Western markets is not actually central bank money, but it’s money held in the bank in deposits in electronic format,” he says. “The world is already one in which [central banks] play a pivotal role, but they don’t dominate.”

The real issue is ensuring the stability of the financial system, van Steenis says, and that means keeping an eye on cryptocurrencies.

Yet the crypto world is still tiny relative to the amount of money in bank deposits, he says. “So I don’t think they’re running scared on bitcoin. But what they want to know is, is there an innovation they need to adapt and borrow from.”

The key concerns are dwindling cash use and tech-firm dominance

A major worry for central bankers is that, as the use of cash dwindles, private payment systems are becoming increasingly crucial and could shake the global financial system if they fail.

“If you think about the pandemic, it’s probably fast-forwarded the shift away from cash to digital by about three to five years,” van Steenis says. “No central banker ever wants to feel they might lose control of their currency.”

A CBDC would ensure everyone has access to a risk-free payment system, proponents argue, and would make transactions safer and more efficient. Just like going directly to the airline for your plane tickets online is faster and easier than going to see a travel agent.

Many central banks around the world are also asking themselves whether they want huge US technology companies like Visa, Mastercard and PayPal to dominate their national payments systems, van Steenis says.

Another common argument is that Western central banks are racing to keep up with China’s advanced CBDC project, which they say could threaten the dollar’s dominance.

But van Steenis is skeptical. “I just don’t see the geopolitical angle is what’s driving it,” he says. “If you ask the Swedes what’s driving the e-krona, it’s much more about a reduction in cash and inclusion and their responsibility to provide to society, than it is because they’re trying to keep up with friends around the world.”

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Huw van Steenis, pictured here in 2007, has worked at the top of investment and central banks.

CBDCs could eat the banking sector’s lunch

Whatever’s pushing it forward, the creation of central bank digital currencies looks set to throw up a number of problems to accompany the benefits.

One concern for bankers is that the technology might eat the financial sector’s lunch. The technical term is “disintermediation” – the idea that giving people access to CBDCs could stop them from needing banks at all.

Van Steenis, who knows Wall Street and the City well, says CBDCs must be created with a two-tier system in which people continue to hold accounts at banks and payment firms.

Yet, he says there are other risks. “What happens when we think about money being moved from country A to country B? Do you then allow your monetary base to be sent to a foreign bank? In which case, how do you regulate them? Do you lose control of your monetary policy?”

Crypto community can innovate while central banks are cautious

These sorts of issues mean central banks and the governments that ultimately control them will be very cautious about building CBDCs, says van Steenis. Countries will need to debate their pros and cons in a process that might take years, he added.

Fed Chair Jerome Powell said in March that the central bank would “move with great care and transparency” and wouldn’t proceed without support from Congress.

That opens the door for others to innovate, van Steenis says, not least those in the crypto world who are developing stablecoins and attractive financial networks.

He says: “Actually, I think the crypto community does have a real window of opportunity to help define a future whilst the central banks are cautiously, but studiously, trying to progress what they do.”

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Ray Dalio says crypto could be a victim of its own success by inviting regulation – and his comments follow tough words from watchdogs

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Ray Dalio is one of the most successful hedge fund bosses of all time.

  • Ray Dalio said cryptocurrencies could become a victim of their own success by inviting regulation.
  • The billionaire hedge fund boss’s comments follow tough words from regulators in the UK and US.
  • Dalio has said governments could get tough on crypto if it threatens their control over money.
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Billionaire hedge fund boss Ray Dalio has said the biggest risk to cryptocurrencies is their own success, which could cause governments to crack down on them to ensure they control the money supply.

Talking about cryptocurrencies, Dalio told the Wall Street Journal “Future of Everything Festival” on Tuesday: “Its own biggest risk is its success, because as a storehold of wealth no government wants to have an alternative currency.”

The comments from Dalio, the founder and co-chief investment officer of investment titan Bridgewater Associates, came soon after regulators and watchdogs in both the UK and US hinted at official skepticism of crypto assets.

Bank of England governor Andrew Bailey said last week people should only invest in crypto “if you’re prepared to lose all your money.”

And Gary Gensler, the new head of the US Securities and Exchange Commission, said in a Congressional hearing the crypto world “could benefit from greater investor protection.”

Dalio said the future of cryptocurrencies is “exciting and unknown.” He added: “Crypto as a digital clearing mechanism and so on, very exciting, very bullish. Crypto as a storehold of wealth, very interesting. Probably will be important for us.”

But he said he remained concerned that governments could get tough on crypto if they feel their monetary sovereignty is threatened, something that he has talked about in the past.

Regulators around the world are increasingly focused on cryptocurrencies after bitcoin’s meteoric rise, with Turkey banning the use of crypto assets for payments and India flirting with an outright ban.

US regulators have not so far announced any plans to tighten crypto regulations, although some analysts have said that Gensler’s stance makes the approval of a bitcoin exchange-traded fund unlikely any time soon.

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Bank of England boosts 2021 UK growth forecast to 7.25% in wake of successful vaccine rollout

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The Bank of England kept interest rates on hold.

The Bank of England sharply upgraded its forecasts for the UK economy on Thursday, citing the successful rollout of coronavirus vaccines and a sharp drop in COVID cases.

Policymakers at the Bank kept interest rates at the record-low level of 0.1% and maintained the size of its bond-buying package, through which the BoE injects money into the economy, at £895 billion ($1.25 trillion).

The BoE predicted UK gross domestic product will grow 7.25% in 2021, considerably higher than its February estimate of 5% growth. UK GDP contracted 9.8% in 2020, the worst slump out of the G7 countries.

The Bank said the unemployment rate should now peak at just under 5.5% in the third quarter of 2021, down sharply from an earlier estimate of a 7.75% peak. And it said UK GDP should recover its pre-pandemic level towards the end of 2021, earlier than previously expected.

“New COVID cases in the United Kingdom have continued to fall, the vaccination programme is proceeding apace, and restrictions on economic activity are easing,” the bank said in its monetary policy statement.

The central bank’s monetary policy committee (MPC) said that while the overall size of its quantitative easing (QE) program would remain the same, the weekly pace of its purchases would slow somewhat.

Thomas Pugh, UK economist at consultancy Capital Economics, said this move was not due to the strength of the economy. “The MPC has always said that it aimed to finish the £150 billion of QE announced last November ‘around the end of 2021’, so the pace of asset purchases was always going to slow at some point,” he said.

The UK has achieved one of the fastest vaccine rollouts in the world, with 51% of the population having received at least one dose by May 4, according to Our World In Data. That compared to 63% in Israel and 44% in the US.

Business and consumer confidence has picked up, as coronavirus cases have fallen following strict lockdowns in January and February and the government has gradually reopened the economy.

On the topic of inflation, which has unnerved financial markets in recent months, the Bank said it expected a short-term spike followed by a fall. It said year-on-year inflation is expected to rise above the Bank’s 2% target towards the end of 2021 before returning to around 2% in the medium term.

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The UK will explore a Bank of England-backed cryptocurrency called ‘Britcoin’

Bank of England
A general view shows The Bank of England in the City of London financial district, amid the outbreak of the coronavirus disease (COVID-19), in London, Britain, November 5, 2020.

  • British finance minister Rishi Sunak revealed the UK is exploring the feasibility of “britcoin,” Reuters reported.
  • It is a cryptocurrency backed by the Bank of England aimed to address the issues bitcoin has.
  • A new task force was launched on Monday to look into a central bank digital currency or CBDC.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell

British finance minister Rishi Sunak on Monday revealed that he is exploring the feasibility of a cryptocurrency backed by the Bank of England dubbed “britcoin,” aimed addressing some of the issues posed by other cryptocurrencies.

“We’re launching a new task force between the Treasury and the Bank of England to coordinate exploratory work on a potential central bank digital currency (CBDC),” Sunak said during the UK FinTech Week conference, as reported by Reuters.

Shortly after the announcement, Sunak published to his nearly 500,000 followers a one-word tweet saying: “Britcoin?”

The new task force will explore opportunities and risks of a CBDC, as well as monitor international CBDC developments to “ensure the UK remains at the forefront of global innovation.”

“The Government and the Bank of England have not yet made a decision on whether to introduce a CBDC in the UK and will engage widely with stakeholders on the benefits, risks, and practicalities of doing so,” the BoE said in a statement Monday.

But, if plans go through, the CBDC will exist alongside cash and bank deposits instead of replacing them, the bank said.

Other central banks across the world are examining the possibility of a digital currency, with China leading the pack. The Asian superpower is already at the point of extensive pilot testing, according to a new Citi report this month entitled Future of Money.

China began developing its digital currency electronic payment CBDC in 2014 and tested a pilot in 2020. Citi said it expects China’s “sprint to a cashless society” within five years.

BoE Governor Andrew Bailey in the past has said that he sees little intrinsic value in bitcoin doubts its utility as a form of payment. Bailey shares this sentiment with US Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde.

Still, bitcoin has skyrocketed 600% in the last 12 months. The market value of cryptocurrencies as a whole hit $2 trillion in April, doubling in value in a matter of months.

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