Inflation hits new 40-year high of 9.4%

The consumer price index rose 3 percentage points higher than the figure in May, according to the Office for National Statistics.

The retail price index, which measures the changes in retail prices of a basket of goods and services, as opposed to the weighted average prices tracked by the CPI, rose to 11.8 per cent, up from 11.7 per cent in May. 

The largest contributing forces to the rise were fuel and food costs, with average petrol prices now at £1.84 per litre, compared with £1.30 per litre a year ago, the ONS said.

The price of food and non-alcoholic drinks has risen by 9.8 per cent in the year to June, the highest rate since March 2009, and includes a 1.2 per cent rise between May and June this year.

Chancellor Nadhim 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 BoE to bear down on inflation.”

Canada Life technical director Andrew Tully noted that the figures are a “further hammer blow” to households across the UK, which will be left reeling from the continuing surge in prices for everyday items. 

With wages officially lagging way behind the cost of living, how long inflation remains high will determine our living standards for years to come, he said. 

“This is the issue the BoE will grapple with as it signals bigger interest rate hikes are on the horizon, as it navigates the choppy waters that lay ahead.”

The inflation rise comes a day after BoE governor Andrew Bailey said a 50 basis points increase in interest rates was “on the table”.

In a speech at the Mansion House dinner on July 20, Bailey said the balance of risk to inflation is “on the upside”.

“In simple terms, this means that a 50bp increase will be among the choices on the table when we next meet,” he said.

The rate now sits at 1.25 per cent, having been raised for a fifth time in a row last month, with three members dissenting and calling for a rise of 0.5 per cent.

This article first appeared on FTAdviser.com