Fuel and food costs have tightened the screws on struggling households, driving UK inflation to a new 40-year high.
In June, the headline CPI rate increased from the previous month’s 9.1% to an alarming 9.4%.
The gain exceeded experts’ expectations by a wide margin and marks the highest level since February 1982.
The Bank of England has signaled that it may raise interest rates by another 0.5 percentage points to 1.75 percent next month in order to counteract rising prices, which will only make things worse for people.
The CPI rate is predicted to soar to around 11 per cent in the Autumn, when the cap on energy bills is due to rise again.
The Bank’s target is for inflation to be just 2 per cent, and new Chancellor Nadhim Zahawi has warned that public sector pay must be restrained to help prevent a disastrous spiral.
Treasury minister Simon Clarke warned in a round of interviews this morning that bowing to union demands for huge increases would cause an ‘action replay of the 1970s’.
According to the most recent ONS statistics, the price of motor fuel increased by 42.3% in the year leading up to June, which is the largest increase in price since records have been kept.
Last month, the average price of gasoline was 184p per litre, up 18.1p from only May, while the average price of diesel shot up 12.7p to a record-high 192.4p per litre.
The cost of food and non-alcoholic beverages rose by 9.8% in the year to June 2022 in Britain, which is the highest pace since March 2009. This has resulted in dramatically higher grocery costs for the nation.
Following similar rises in April and May as rising cost pressures and the effects of the Ukraine crisis trickle down to food costs, food prices increased by 1.2% month over month in June.
Following similar rises in April and May due to increased cost pressures and the effects of the Ukraine war, food prices increased 1.2% month over month in June.
According to the ONS, the most significant price increases were reported for staples like milk, cheese, and eggs, but there were also significant price increases for vegetables, meat, and other food items like ready meals.
It comes on top of exorbitant gas and electricity price hikes at a time when yearly inflation is at a record 70.2% and is expected to continue rising.
According to Grant Fitzner, the ONS’s senior economist, “Annual inflation again climbed to stand at its highest rate in over 40 years.”
‘The increase was driven by rising fuel and food prices, these were only slightly offset by falling second-hand car prices.
‘The cost of both raw materials and goods leaving factories continued to rise, driven by higher metal and food prices respectively.
‘These increases saw raw materials post their highest annual increase on record, with manufactured goods at a 45-year high.’
Mr Zahawi said: ‘Countries around the world are battling higher prices and I know how difficult that is for people right here in the UK, so we are working alongside the Bank of England to bear down on inflation.
‘We’ve introduced £37billion worth of help for households, including at least £1,200 for 8million of the most vulnerable families and lifting over two million more of the lowest paid out of paying personal tax.’
In a speech in London last night, Mr Bailey said a bigger interest rate rise will be one of the options being mooted at the next meeting of the Bank of England’s decision-makers.
He said a 50 basis percentage point rise – which would take rates from 1.25 per cent to 1.75 per cent – is on the table as part of its vow to ‘act forcefully’ if inflation shows signs of becoming embedded in the economy.
However, Unite general secretary Sharon Graham warned that it will not tolerate below-inflation pay rises.
‘Workers have had the spring, summer, autumn and winter of discontent for years. We now have record inflation to match record temperatures,’ she said.
‘Average pay is now falling at the fastest rate in 20 years. Unite will not stand by and let workers take the hit for a crisis not of their making.’
Shadow chancellor Rachel Reeves said the inflation figures showed there was a need for more than just ‘sticking plasters’ to fix the economy.
‘The cost-of-living crisis is leaving families more worried every day, but all we get from the Tories is chaos, distraction and unfunded fantasy economics,’ she said.
‘Rising inflation may be pushing family finances to the brink, but the low-wage spiral facing so many in Britain isn’t new.
‘It’s the result of a decade of Tory mismanagement of our economy meaning living standards and real wages have failed to grow.’
Anna Leach, deputy chief economist at the Confederation of British Industry warned inflation was likely to remain high for the rest of the year ‘severely eating into strained household incomes’.
She said: ‘This data underscores the need to give people more control over their energy bills: through speeding up planning decisions for electricity infrastructure and creating a national effort to help households better insulate their homes.
‘But to build resilience to price shocks over the longer-term, the Government needs to focus on boosting the economy’s supply potential.
‘Incentivising investment through a permanent successor to the super deduction and supporting the development of green infrastructure are crucial first steps.’
