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Mounting cost crisis sees inflation soar to fresh 40-year high

·3-min read

UK inflation has surged to a fresh 40-year high as fuel and energy prices rocketed amid the cost-of-living squeeze, according to official figures.

The Office for National Statistics (ONS) said Consumer Prices Index (CPI) inflation rose to 9.4% in June, up from 9.1% in May.

This remains the highest level since February 1982 and heaps yet further cost pain on cash-strapped households and businesses.

UK inflation rate
(PA Graphics)

Grant Fitzner, chief economist at the ONS, said: “Annual inflation again rose to stand at its highest rate for over 40 years.

“The increase was driven by rising fuel and food prices; these were only slightly offset by falling second-hand car prices.”

Newly appointed Chancellor Nadhim Zahawi and Bank of England Governor Andrew Bailey have both pledged to get inflation under control.

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.”

In a speech in London on Tuesday evening, 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% to 1.75% – is on the table as part of its vow to “act forcefully” if inflation shows signs of becoming embedded in the economy.

The latest ONS data revealed that the cost of motor fuels jumped by 42.3% in the 12 months to June – the biggest leap since records began.

Average petrol prices stood at 184p a litre last month, up 18.1p since May alone, while diesel raced 12.7p higher to 192.4p a litre, which was also a record.

Britons are also being hit by sharply higher grocery bills, with food and non-alcoholic drink prices having risen by 9.8% in the year to June 2022 – the highest rate since March 2009.

Food prices lifted 1.2% month on month in June, which follows similar increases in April and May as higher cost pressures and the impact of the Ukraine war filter down to the supermarket shelves.

The ONS said the largest upward effect came from essentials such as milk, cheese and eggs, but big price rises were also seen for vegetables, meat and other food products, such as ready meals.

It comes on top of eye-watering gas and electricity tariff increases, with the annual inflation rate standing at a record 70.2% and with further rises to come.

Ofcom’s next review of the energy price cap is expected to push inflation above 11% in the autumn.

Torsten Bell, chief executive of living standards at think tank the Resolution Foundation, said it is a “disaster for poorer households” to see food prices rising faster than the wider inflation rate.

But he added that soaring petrol prices are also hitting wealthier families.

The ONS figures also show that the CPIH, which includes owner-occupiers’ housing costs and is the ONS’s preferred measure of inflation, rose by 8.2% in June, up from 7.9% in May.

The Retail Prices Index (RPI) rose from 11.7% in May to 11.8% in June.

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