Inflation hits 40-year high
Inflation continued at a generational high last month, increasing to a 40-year peak.
Prices rose 9.1% in the year to May, slightly higher than April’s 9.0%.
Economists expected the high level to be maintained, with the peak still forecast to be ahead of us.
Last week the Bank of England forecast inflation could reach 11% this autumn. The current level of inflation is already the highest since 1982, the last time it reached double digits.
In a statement Chancellor Rishi Sunak said: “We are using all the tools at our disposal to bring inflation down and combat rising prices – we can build a stronger economy through independent monetary policy, responsible fiscal policy which doesn’t add to inflationary pressures, and by boosting our long-term productivity and growth.”
The Office for National Statistics said food and non-alcoholic drinks rose fastest in the last month, while energy, housing and transport costs continue to drive the annual costs.
Anna Leach, CBI’s deputy chief economist, said the result of high inflation “will be much pain for those businesses most exposed to higher costs, and a historic squeeze on households’ incomes.”
The business organisation called for government action to shore up both near and long-term economic growth, to “fill the void” of falling household spending. The CBI wants to see a commitment to a permanent successor to the super-deduction, and support for green infrastructure and technologies.
Laura Suter, head of personal finance at AJ Bell, said double digit inflation is “just around the corner”.
She said: “Unfortunately, more gloom lies ahead, and the hopes of inflation ebbing away later this year are dead.
“Energy costs will drive inflation higher later this year, with the latest estimates showing that the energy price cap will now rise to £3,000 in October, far more than many had expected, and that it won’t fall in the January update either.
“It means one thing is for certain, this rising inflation isn’t going away any time soon and this coming winter could be tougher than the last.”