- Andrew Bailey, the Bank’s governor said both would be on the table at the August meeting of its monetary policy committee.
- 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.”
Analysts’ predictions were exceeded by May’s 9.1% number, and some are criticising Bank’s 11% autumn estimate as being too low as reported by The Guardian.
New prices
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.
Forecasting inflation
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 expect 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 increase was driven by rising fuel and food prices; these were only slightly offset by falling secondhand car prices.”
The UK’s statistical agency said the cost of motor fuel had risen by more than 42% in June, with petrol and diesel hitting new highs last month.
Necessities cost soar
The Resolution Foundation think tank said the inflation rate for the poorest 10% of households was already running at 10.6% because they spent a higher proportion of their incomes on food and energy.
TUC general secretary Frances O’Grady said: “Families are under immense pressure as food and energy costs soar, and companies raise prices much faster than wages.”
Core inflation – which strips out food, energy, alcohol and tobacco – stood at 5.8% last month, down from 5.9% in the year to May. Yet more inflationary pressure could be in the pipeline, according to separate ONS data for producer prices, which measures how much firms are paying for their fuel and raw material and the prices they charge their customers.
“The cost of both raw materials and goods leaving factories continued to rise, driven by higher metal and food prices respectively,” Fitzner said.
“These increases saw raw materials post their highest annual increase on record, with manufactured goods at a 45-year high.”
Battling costs
Nadhim Zahawi, the chancellor, said: “We are working with the Bank of England to bear down on inflation. Countries around the world are battling increased costs, and I know how difficult it is for individuals right here in the UK. We’ve provided household assistance totalling £37 billion, including at least £1,200 for 8 million of the most disadvantaged families and the removal of personal taxation for nearly 2 million additional low-income individuals.”
The cost of the living problem is making families more anxious every day, yet all we get from the Tories is turmoil, diversion, and unfunded fantasy economics, according to his Labour counterpart, Rachel Reeves.
Did you subscribe to our daily Newsletter?
It’s Free! Click here to Subscribe
Source: The Guardian
