ONS figures showed that in the three months to May, real wages in the UK saw their sharpest decline since records began in 2001.
Henry Nicholls | Reuters
LONDON — Inflation in the UK hit another 40-year high in June as food and energy prices continued to rise, escalating the country’s historic cost of living crisis.
The consumer price index rose 9.4% a year, according to Wednesday estimates, slightly above a consensus forecast among economists polled by Reuters and up 9.1% in May.
This represented a 0.8% monthly increase in consumer prices, ahead of the previous month’s 0.7% increase, but lagging behind the 2.5% monthly increase in April.
The UK’s Office for National Statistics said in Wednesday’s report that its indicative modeled estimates of consumer price inflation “suggest that the CPI rate might have been higher around 1982, where estimates range from nearly 11% in January to about 6.5% in January.” December.”
The main contributors to rising inflation have come from motor fuels and food, the ONS said, with the former rising 42.3% year-on-year, the highest rate since before the start of the constructed historic series in 1989.
50 basis points increase?
The Bank of England has made five consecutive 25 basis point rate hikes to curb inflation, but Governor Andrew Bailey suggested in a speech at the Mansion House Financial and Professional Services Dinner on Tuesday that the Monetary Policy Committee would approve a 50 basis point hike at its policy meeting. August.
This would be the biggest hike in UK interest rates in nearly 30 years, and Bailey promised there would be “no ifs or buts” in the Bank’s commitment to bring inflation back to its 2% target. The governor has faced public criticism from several conservative parties seeking to replace Boris Johnson as prime minister.
“From a monetary policy perspective, these times represent the greatest challenge to the inflation-targeting monetary policy regime that we’ve seen in the quarter-century since the MPC’s inception in 1997,” Bailey said.
“That emphatically does not mean that the regime has failed. Far from. The regime was set up for times just like this. The regime, based on central bank independence, is now more important than ever. the difficult, not the beautiful, times.”
The Bank expects inflation to peak at around 11% later in the year, while new ONS data on Tuesday showed that in the three months to May, real wages in the UK experienced their steepest decline since the start of the recession. records in 2001, as wage increases came no closer to inflation.
“Intense pressure on the cost of living is putting significant pressure on the UK’s consumer-led economy and means the risk of a recession is high,” said Hussain Mehdi, macro and investment strategist at HSBC Asset Management.
Nevertheless, the Bank of England is likely to remain in uber-hawkish mode as it tries to counter the risk of an evolving wage-price spiral with recent data pointing to a still hot labor market contributing to the domestic economy. inflationary pressures.”