View more on these topics

Inflation soars to 3.8% in June, says ONS

Consumer Price Index annual inflation soared to 3.8 per cent in June, up from 3.3 per cent in May, according to the latest figures from the Office for National Statistics.

Yesterday the Bank of England governor Mervyn King admitted that the Monetary Policy Committee can do little to change the path of inflation in the short term.

The largest upward pressure came from food and non-alcoholic beverages which rose from an annual rate of 7.8 per cent in May, to 9.5 per cent in June.

Food inflation alone has risen to 10.6 per cent, up from 8.7 per cent in May. The ONS says that this was due to rising meat costs, particularly beef.

Petrol prices were once again driven to new highs. The average price of petrol at the pumps increased by 5.3 pence per litre between May and June this year, to stand at 117.6 pence, compared with a rise of 1.3 pence last year.

RPI inflation rose to 4.6 per cent in June, up from 4.3 per cent in May. The main factors affecting the CPI also affected the RPI.

The ONS says that additionally, there was a large downward contribution from housing. The effect came mainly from mortgage interest payments where there was a smaller increase this year than last year and, to a lesser extent, from house depreciation. Both mortgage interest payments and depreciation are excluded from the CPI.

Propertyfinder.com director Nicholas Leeming says: “Today’s inflation figures tell us how prices have behaved up to this point but most forces in the economy are now working to slow growth rapidly. The housing market has stalled as so few can get access to mortgages and the effects of this are now hitting the high street. This is already reflected in people’s attitudes – according to our research 71 per cent of people questioned in July think that economic growth is slowing dramatically.

“Inflation expectations should follow and come under control. It is essential for the health of the economy that the Bank continues to use a light touch to tackle inflation and does not increase base rates, otherwise it risks sacrificing the economy at the altar of short term inflation.”

Recommended

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment