Rising prices continue to wallop British wallets
Inflation in the UK remained stubbornly high in May and exceeded expectations for the fourth month in a row, according to figures released by the Office for National Statistics (ONS) on Wednesday. This comes despite forecasts that consumer prices would fall in response to declining energy costs.
Price growth stood at 8.7% last month, unchanged from April but above the 8.4% predicted by economists, the ONS said. Core inflation, which excludes volatile food, energy, alcohol, and tobacco prices accelerated unexpectedly to a 31-year high of 7.1% year-on-year. This has prompted the Bank of England to raise interest rates by half a percentage point to 5% on Thursday.
“Rising prices for air travel, recreational and cultural goods and services, and second-hand cars resulted in the largest upward contributions to the monthly change in both the CPIH and CPI annual rates,” the ONS said.
Although inflation dropped below the 10% recorded in April, it continues to exceed consensus forecasts and remains well above the Bank of England’s 2% target. The monthly increase in overall prices of 0.7% in May alone indicates that the current rate of price increases is not slowing down as household bills are still rising at the fastest rate among G7 countries.
Supermarket inflation in Britain also remains stubbornly high at 16.5%, its sixth-highest level since the financial crisis in 2008, according to the research company Kantar.
“We know how much high inflation hurts families and businesses across the country, and our plan to halve the rate this year is the best way we can keep costs and interest rates down,” Finance Minister Jeremy Hunt said in a statement on Wednesday.
The latest inflation data came ahead of the Bank of England’s monetary policy decision on Thursday. The regulator announced its 13th consecutive interest rate hike to 5%, as it faces the challenge of taming inflation without creating a mortgage crisis or a recession.
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