Inflation rose to 9.1 per cent on the year in May, taking the UK’s consumer price index to a 40-year-high. Optimists are noting the slowdown in pace, rising by 0.1 per cent between April and May. But I suspect we are in the eye of the storm. This price spiral is nowhere close to over, not least because the next energy price cap review is currently estimated to lift bills by an additional £1,000.
The Bank of England’s latest forecast predicts inflation will peak at around 11 per cent, but it must be said that the Bank has consistently underestimated the inflation rate, playing catch-up with its forecasts, as well as its rates policy. Today’s figures will further convince the Bank that its snail’s pace interest rate hikes to combat inflation are still the right way to go, making it increasingly likely that the next meeting of the monetary policy committee will see rates go up again by a relatively meagre 0.25
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