Households across Britain were warned today that they will suffer economic “pain” after inflation sky-rocketed to a 40-year high of 10.1 per cent.
The shock rise in prices from 9.4 per cent in June caught the City by surprise and sparked fresh accusations that Bank of England interest rate setters have been too slow to respond to the spiralling crisis. The Government also came under fire for not taking more action in recent months to protect millions of families struggling to make ends meet as the cost of food, energy and fuel have soared.
The 10.1 per cent CPI inflation is the highest since February 1982 when Margaret Thatcher was Prime Minister and has sent living standards plummeting more quickly than at any time since detailed records began in 2001.
Grant Fitzner, chief economist at the Office for National Statistics, said: “Food prices rose notably, particularly bakery products, dairy, meat and vegetables. Price rises in other staple items, such as pet food, toilet rolls, toothbrushes and deodorants, also pushed up inflation in July.”
The cost of package holidays also rose as demand returned, but by far the biggest jumps were still in the cost of gas, electricity and fuels.
Economists warned that the Bank’s Monetary Policy Committee could be forced to more than double interest rates from 1.75 per cent to 3.5 or four per cent, which would pile more financial misery on many homeowners.
Commuters also face being hit next year with huge rail ticket hikes as RPI inflation, a measure used to set regulated fares, rose to 12.3 per in July, up from 11.8 per cent the previous month and the highest since January 1982.
Ministers have signalled they will ditch the usual formula this year so regulated fare rises will be below inflation. But even if they are half RPI, they would still go up by more than six per cent which would be the biggest since the 1996 railway privatisation. Separate data yesterday put grocery inflation at 11.6 per cent.
Asda chairman Lord Rose, a Tory peer, criticised the Bank of England for being “very, very slow in recognising this train coming down the tunnel” and the Government for a “horrifying” lack of action over the inflation crisis. “It’s going to be painful for everybody,” he told BBC radio.
He called for more targeted support as inflation, which is forecast to reach more than 13 per cent in the autumn, “hits the poorest hardest”.
On a visit to the government-funded Sydenham School’s holiday activities and food project in south-east London, Chancellor Nadhim Zahawi said tackling inflation was his “top priority”.
He said: “We have continually taken action to help households by phasing in £37 billion worth of support throughout the year which includes £1,200 of extra support for eight million of the most vulnerable households and £400 off energy bills for everyone over the winter.”
But the inflation figures piled pressure on Foreign Secretary Liz Truss and Rishi Sunak to lay out what more action they would take if they become Prime Minister.
Shadow chancellor Rachel Reeves said: “We must get a grip on rising inflation leaving families worried sick.”
