The chancellor, Jeremy Hunt, has said the UK may experience a “blip” increase in inflation this month, as data suggested that average fuel prices have jumped back above £1.50 a litre.
Hunt said the government is on track to hit its target of halving inflation by the end of the year but suggested the rate of price rises could spike when the latest figures for August are published in September.
UK inflation reached more than 10% at the end of 2022 because of the soaring prices of goods and services ranging from energy and food to transport and clothing. The prime minister, Rishi Sunak, has pledged to halve inflation, suggesting it needs to fall to about 5% to meet the target.
However, prices have risen more during 2023 than expected by the Bank of England, which has raised interest rates at 14 consecutive meetings in an effort to tame inflation.
Data published on Monday suggested that inflationary pressures are still evident for drivers. The price of petrol rose by nearly 7p a litre in August, while diesel jumped by 8p, according to the RAC, the roadside repair company. They were the fifth and sixth biggest monthly rises in 23 years of tracking the data, the RAC said.
The average price of unleaded petrol finished August at 152.25p, up from 145.57p at the beginning of the month. That would add nearly £4 to an average tank, the RAC said.
Brent crude oil prices surged above $120 a barrel in June 2022 after the invasion of Ukraine by Russia, a major fossil fuels supplier. That prompted UK pump prices to rise by a record 17p in June 2022 to nearly £2 a litre, and UK inflation to hit a 41-year high of 11.1% in October.
Brent crude oil prices fell back to about $75 at the end of June, but jumped back to nearly $87 at the end of August.
Simon Williams, the RAC’s fuel spokesperson, said: “August was a big shock to drivers as they had grown used to seeing far lower prices than last summer’s record highs.
“Seeing £4 or more go on to the cost of a tank in the space of just a few weeks from a pump price rise of 6-7p a litre is galling, particularly for those who drive lots of miles or run an older, less fuel-efficient car.
“While the increase is clearly bad news for drivers, it could have been far worse had the biggest retailers not let their inflated margins from earlier in the year return to more normal levels as wholesale fuel costs went up.”
Fighting inflation is generally seen as the job of central banks but Hunt insisted that the government’s “plan is working, inflation is coming down”, in an interview with the BBC on Sunday.
But when it was put to him that inflation could have risen in August, he said: “I do think we may see a blip in inflation in September. But after that the Bank of England is saying it will fall down to around 5%.
“And you know, if we are going to put money in people’s pockets quickly, the fastest thing I can do is to deliver the prime minister’s pledge to halve inflation, because that puts not 1p in the pound, which might be a tax cut, but 5p in the pound in people’s pockets that they wouldn’t have had if inflation stays high.”
