LONDON – British annual inflation has hit a fresh 40-year high, official data showed today, further eroding workers’ wages and pressuring the Bank of England to keep on raising interest rates.
The rate edged higher to 9.1% in May from 9% in April, remaining at the highest level since 1982, the Office for National Statistics (ONS) said in a statement.
UK inflation is set to top 11% before the end of the year according to the Bank of England, fuelled by soaring energy prices that have raised the prospect of a global recession.
UK inflation increased in May on “continued steep food price rises and record-high petrol prices”, said ONS chief economist Grant Fitzner.
This was offset by clothing costs rising by less than a year earlier and a drop in prices of computer games, he added.
Decades-high inflation is causing a cost of living crisis.
Britain’s railway workers are this week staging the sector’s biggest strike action in more than 30 years, as soaring prices erode the value of wages.
“The further increase in consumer prices index (CPI) inflation to 9.1% underscores the severe pressure that businesses and households are under,” said David Bharier, head of research at the British Commerce Chambers.
“This inflationary surge sits alongside a poor economic outlook and unless the government acts with urgency to encourage businesses to invest, the chances of a recession will only increase.”
Countries around the world are being hit by soaring inflation as the Ukraine war and the easing of Covid-19 restrictions fuel energy and food price hikes.
That has forced central banks to hike interest rates, risking the prospect of recession as higher borrowing costs hit investment and consumers further in the pocket.
The Bank of England has raised its key interest rate five times since December.
“The modest rise in CPI inflation... won’t prevent the Bank of England from raising interest rates further, but it may encourage it to opt again for a quarter-point rate hike at its next meeting in August rather than upping the ante with a half-point rise”, predicted Paul Dales, chief UK economist at Capital Economics.
It comes as Britain faces strikes across other sectors. Lawyers in England and Wales have voted to walk out from next week in a row over legal aid funding.
Teaching staff, workers in the state-run National Health Service and the postal service are also mulling strike action. – AFP, June 22, 2022
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