Britain’s rate of inflation has surged to a fresh 40-year high as rocketing fuel and food prices drove it closer towards double figures.
Official data showed that Consumer Prices Index (CPI) inflation rose to 9.4% in June, up from 9.1% in May and remaining at the highest level since February 1982.
June’s inflation rate was higher than the 9.3% expected by most economists and heaps yet further pain on cash-strapped households and businesses as the cost-of-living crisis intensifies.
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 50 basis percentage point rise – which would take rates from 1.25% to 1.75% – will be one of the options on the table at the next Bank meeting as it looks to “act forcefully” on inflation.
The data from the Office for National Statistics (ONS) 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.
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.”
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, which will only partially be offset by the Government’s £400 discount to gas and electricity bills and £650 one-off support payment for vulnerable households.
Yael Selfin, chief economist at KPMG, said: “The peak in inflation is still some way off, and is not expected to return to the 2% target before mid-2024.
“This means more pain is on the way for household budgets as the high rate of inflation continues to outpace wage growth, bringing down the real value of incomes across the UK.”
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.