Yesterday, Reuters said food price increases pushed British consumer price inflation to a 40-year high of 9.1 per cent last month.
This is the highest rate among the Group of Seven (G7) countries and emphasises the severity of the cost-of-living crisis.
The reading, up from 9% in April, matched the consensus of economists polled by Reuters.
According to the Office for National Statistics (ONS), May’s inflation was the highest since March 1982, and worse is on the way.
Energy and inflation
Inflationary pressure in the UK continued on an uptrend trajectory due to elevated global energy prices.
Widening imported energy bills and Brexit problems are pressuring down the economy. The Bank of England has raised its interest rate to 13-year high at 1.25%, aiming to combat inflation risk.
However, the central bank expects inflation to be over +9.0%yoy in the next few months. This is very far from the target rate of +2.0%.
On the flip side, the demand factor played a significant role in the rising inflation given that the jobless rate declined to a 48-year low at 3.7% in Mar-22 and core inflation hit a record high at +6.2%yoy in Apr-22.
However, the outlook turns cloudier as business confidence and consumer sentiment are indicating further weakness in the near term. High inflation to stay for long, Brexit concerns and higher borrowing costs to weigh down the UK’s economic performance for this year, says MIDF.