Real wages in the UK suffered their steepest fall in the three months to May since records began in 2001, ONS figures show.
Henry Nicholls | Reuters
LONDON – UK inflation hit another new 40-year high in June as food and energy prices continued to rise, exacerbating the country’s historic cost-of-living crisis.
The consumer price index rose 9.4% annually, according to Wednesday’s estimates, just above the consensus forecast among economists polled by Reuters and above. It was 9.1% in May.
That represented a 0.8% monthly decline in consumer prices, beating the previous month’s 0.7% rise, but below the 2.5% monthly increase in April.
The UK’s Office for National Statistics said in a report Wednesday that its indicative model of consumer price inflation estimates “suggests that the CPI rate would have been higher in 1982, where estimates ranged from nearly 11% in January to around 6.5% in December.”
The most significant contributors to the rising rate of inflation came from motor fuels and food, the ONS said, which rose 42.3% the previous year, the highest rate since the start of the historic streak dating back to 1989.
The Bank of England It has implemented five consecutive 25 basis point interest rate hikes to curb inflation, but Governor Andrew Bailey suggested in a speech At the Mansion House Financial and Professional Services dinner on Tuesday, the monetary policy committee could consider a 50 basis point hike at its August policy meeting.
It would be the UK’s biggest single interest rate increase for almost 30 years, and Bailey vowed a “no if no” on the bank’s commitment to returning inflation to its 2% target. Many criticisms of the governor came from the public The Conservatives are expected to replace Boris Johnson as Prime Minister.
“From a monetary policy perspective, these times are the greatest challenge to the monetary policy regime of inflation targeting that we have seen in the quarter century since the creation of the MPC in 1997,” Bailey said.
“It does not mean that the regime has failed. It is far from it. It is in times like these that the regime was established. A regime founded on central bank independence is now more important than ever. The value of any regime is being tested. Hard times, not pleasant.”
The bank expects inflation to rise to 11% later in the year, while new ONS figures on Tuesday showed real wages in the UK in the three months to May suffered their steepest fall since records began in 2001, as pay rises failed to catch up with inflation.
“The intense cost of living is putting considerable pressure on the UK’s consumer-led economy and the risk of a recession is high,” said Hussain Mehdi, macro and investment strategist at HSBC Asset Management.
“However, the Bank of England is likely to remain uber-hawkish as it tries to counter the risk of a developing wage-price spiral with recent data suggesting an even warmer labor market contributing to domestic inflationary pressures.”