The prospect of inflation hitting 12% this autumn is looming larger after dearer fuel and food pushed the official measure of the cost of living to a fresh 40-year high.
A one-month increase in petrol prices not seen since at least the late 1980s, coupled with across the board increases in food staples such as eggs, milk, cheese and vegetables sent Britain’s annual inflation rate up from 9.1% to 9.4% in June.
With the annual energy price cap predicted to rise from just under £2,000 to more than £3,000 in October, analysts warned there was worse to come.
Paul Dales, chief UK economist at Capital Economics said there was some sign global price pressures were being replaced by higher domestically generated inflation.
“We still think inflation will rise to 12% in October and that interest rates will be raised from 1.25% to 3%, although it’s finely balanced whether they rise by 25bps or 50bps in August,” Dales said.
The Bank of England said last month it expected the annual inflation rate, which stood at 2.5% in June 2021 and has risen for nine months in a row, to peak at just over 11% in the autumn before falling sharply next year.
The City had been forecasting inflation would pick up to 9.3% after the price of unleaded petrol rose by about 20p a litre in June. Markets are expecting the Bank to respond to the highest inflation since 1982 by raising interest rates by either 0.25 or 0.5 percentage points next month. Andrew Bailey, the Bank’s governor said both would be on the table at the August meeting of its monetary policy committee.
Prices rose by 0.8% between May and June – the highest June increase since modern records began in 1988 – compared with a 0.5% jump in the same month a year earlier.
The ONS chief economist, Grant Fitzner, said: “Annual inflation again rose to stand at its highest rate for over 40 years. The increase was driven by rising fuel and food prices; these were only slightly offset by falling secondhand car prices.”
Hot Topics
Sri Lanka Crisis Is A Warning To Other Asian Nations
Make Fresh Money In Crypto Market: FreshForex Offering A Promo For Crypto Forcast
The UK’s statistical agency said the cost of motor fuels had risen by more than 42% in the year to June, with petrol and diesel hitting new highs last month. More expensive fuel was only partly offset by a drop in the price of secondhand cars. Source: TG...
