Inflation in the UK hit 9.4% year-on-year in June, the highest increase since 1982, the Office for National Statistics reported on Wednesday. Consumer prices rose 9.4% in June amid the worsening cost of living crisis.
Inflation in Britain accelerated at a faster pace than expected in June and hit 9.4% year-on-year, the highest increase since February 1982, according to data released by the Office for National Statistics on Wednesday.
The Consumer Prices Index was expected to rise by 9.3% in June, from 9.1% in May. Prices for motor fuels and food made the largest upward contributions to the change, the UK’s statistics body said.
According to its figures, the annual increase for transport was 15.2%. The prices of food and non-alcoholic beverage surged by 9.8% from a year ago, the most since March 2009.
Last month, the Bank of England forecast inflation to peak at 11% in the autumn, and it reportedly plans a half-point interest rate hike in August, after a quarter of a point increase in June.
The most significant contributors to the rising inflation rate came from motor fuels and food, the ONS said, with the former soaring 42.3% on the year, the highest rate since before the start of the constructed historical series in 1989.
50 basis point hike?
The Bank of England has implemented five consecutive 25 basis point hikes to interest rates as it looks to rein in inflation, but Governor Andrew Bailey suggested in a speech at the Mansion House Financial and Professional Services Dinner on Tuesday that the Monetary Policy Committee could consider a 50 basis point hike at its August policy meeting.
This would constitute the U.K.’s biggest single increase in interest rates for nearly 30 years, and Bailey vowed that there would be “no ifs or buts” in the Bank’s commitment to return inflation to its 2% target. The governor has received public criticism from several of the Conservative Party hopefuls to replace Boris Johnson as prime minister.
The Bank expects inflation to peak at around 11% later in the year, while new ONS figures Tuesday showed that real wages in the U.K. over the three months to May experienced their steepest decline since records began in 2001, as pay increases failed to draw close to the inflation rate.
“The intense cost of living squeeze is putting significant pressure on the UK’s consumer-led economy and means the risk of recession is high,” said Hussain Mehdi, macro and investment strategist at HSBC Asset Management.
“Nevertheless, the Bank of England is likely to remain in uber-hawkish mode as it attempts to counter the risk of a wage-price spiral developing with recent data suggesting a still hot labor market that is contributing to domestic inflationary pressures.”