UK inflation is expected to soar even further above current eye-watering 40-year highs when official figures lay bare the extent of the mounting cost-of-living crisis on Wednesday.
The latest figures from the Office for National Statistics (ONS) will show Consumer Prices Index (CPI) inflation rose to at least 9.3% in June, up from 9.1% in May, which was already the highest since early 1982, economists are forecasting.
It comes as the cost-of-living crisis – deepened by Russia’s invasion of Ukraine in late February – is sending energy and fuel prices rocketing to record levels and filtering through to everything from food and clothing to holidays and household goods.
Many of the frontrunners to replace current PM Boris Johnson, former chancellor Rishi Sunak aside, have promised sweeping tax cuts as part of their leadership campaign. Such tax cuts may help stimulate the economy, but also risk creating more entrenched underlying inflation— Ellie Henderson, Investec Economics
But rampant inflation is yet to peak, with the Bank of England recently predicting that inflation will soar past 11% later this year when the energy price cap is reviewed once again.
The Bank has raised interest rates at each of its last five meetings to 1.25% as it looks to rein in inflation, with further hikes on the way given the frightening outlook for prices.
Experts believe further price rises at the petrol pumps and in grocery shops will be the reason behind June’s leap in CPI.
Ellie Henderson, an economist at Investec Economics, said: “A driving factor behind this is rising fuel prices. More timely data has pointed to an over 9% gain in fuels and lubricant prices in June.
“We expect airline prices to also show hefty price gains in June due to higher fuel costs, with prices already under upward pressure owing to a burst in demand meeting labour shortages.
“Finally, given the continued conflict in Ukraine, high food price inflation is likely to have remained in June, exacerbated by a weaker sterling given the UK’s dependence on imported food products.”
Newly-appointed Chancellor Nadhim Zahawi has pledged to get inflation back under control, while the Bank of England has also insisted it will return CPI to its 2% target.
But, with many of the factors pushing up inflation beyond their control and with wages rising as workers demand more money to cope with cost increases, there are fears it could last for longer.
And the tax cuts being promised by candidates to replace Boris Johnson as prime minister may end up fuelling price rises, experts fear.
Ms Henderson said: “Aside from the energy outlook, recent political events add an extra layer of uncertainty as to how long ‘core’ inflation, excluding food and energy, maypersist for.
“Many of the frontrunners to replace current PM Boris Johnson, former chancellor Rishi Sunak aside, have promised sweeping tax cuts as part of their leadership campaign.
“Such tax cuts may help stimulate the economy but also risk creating more entrenched underlying inflation.”
