Any hopes that the Bank of England will ease the pace of interest rate hikes likely to be dashed as prices edge higher.
Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “There has been no let-up in inflation, which rose higher last month - mainly driven by rising food and petrol prices. Prices rose in five of the 12 sectors measured by the ONS, including sectors such as furniture, housing and transport, but there were price declines in the clothing, recreation and culture and health categories.
“The pick-up in inflation last month has dashed hopes that price increases would ease, giving consumers and businesses much-needed respite before the cost-of-living spikes again in the autumn when the energy price cap is set to rise again, adding £800 to the typical annual household energy bill.
“Inflation is much too high at present, forcing many Britons to make serious lifestyle changes to maintain financial buoyancy – be it reducing the number of car journeys they make to save on fuel, cancelling streaming services or switching from mainstream supermarkets to discounters. The sacrifices needed are often starker for low-income households. We have seen troubling reports of people skipping meals to weather rising prices.
“Runaway inflation puts further pressure on the Bank of England to take bolder action to rein in spiralling prices. Any hopes that it will ease the pace of interest rate hikes are likely to be dashed. This is despite concerns about the impact that higher interest rates will have on the cost of borrowing and mortgage rates.
“However, inflation continues to balloon due to factors that are difficult for UK policymakers to control, ranging from the fallout of the devastating war in Ukraine to the impact of China’s zero Covid policy on manufacturing.
“Higher prices are here to stay, so it is important to consider what protective steps you can take now to avoid money worries later on.”
- The Consumer Prices Index (CPI) rose by 9.1% in the 12 months to May 2022, up from 9.0% in April.
- On a monthly basis, CPI rose by 0.7% in May 2022, compared with a rise of 0.6% in May 2021.
- Rising prices for food and non-alcoholic beverages, compared with falls a year ago, resulted in the largest upward contribution to the change in both the CPIH and CPI 12-month inflation rates between April and May 2022 (0.17 percentage points for CPIH).
- The largest offsetting downward contributions to change in the rates were from recreation and culture (0.10 percentage points for CPIH) and clothing and footwear (0.08 percentage points for CPIH).
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