The rate of inflation has hit a new 40-year high, rising into double figures to hit 10.1% The Consumer Price Index - the rate at which everything we buy is getting more expensive, was 9.4% in June and is now at its highest level since 1982.
The level is higher than forecast with experts thinking it would stay below 10%. The inflation figure usually used to determine annual rises in some train fares set to be released by the ONS hours later at 9.30am is expected to be even higher.
After CPI inflation was shown to reach 10.1% in July, ONS chief economist Grant Fitzner said: “A wide range of price rises drove inflation up again this month.
“Food prices rose notably, particularly bakery products, dairy, meat and vegetables, which was also reflected in higher takeaway prices.
“Price rises in other staple items, such as pet food, toilet rolls, toothbrushes and deodorants also pushed up inflation in July.
“Driven by higher demand, the price for package holidays rose, after falling at the same time last year, while air fares also increased.
“The cost of both raw materials and goods leaving factories continued to rise, driven by the price of metals and food respectively.”
Responding to the rise in inflation, Chancellor Nadhim Zahawi said: “I understand that times are tough, and people are worried about increases in prices that countries around the world are facing.
“Although there are no easy solutions, we are helping where we can through a £37 billion support package, with further payments for those on the lowest incomes, pensioners and the disabled, and £400 off energy bills for everyone in the coming months.
“Getting inflation under control is my top priority, and we are taking action through strong, independent monetary policy, responsible tax and spending decisions, and reforms to boost productivity and growth.”
July’s retail prices index (RPI), which the UK, Scottish and Welsh Governments have traditionally used to set the cap on the following year’s increase in regulated train fares, is predicted to be around 12%.
The Department for Transport announced on Monday that the 2023 increase in regulated fares in England will be below the inflation measurement.
Wales usually makes similar fare changes to England, while the Scottish Government has not announced its plan for 2023.
Wednesday’s predicted CPI figure would be a big step up from inflation of 9.4% in June this year. However, worse is yet to come, according to experts.
Inflation is expected to peak later this year at 13.3% and will push the UK into a recession, according to the Bank of England (BoE).
The rise will come as the energy price cap – which regulates what more than 20 million households pay for their gas and electricity – rises in October.
The cap is set to hit around £3,635 according to the latest predictions. It is an 84% rise from today’s already record high price cap.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that motor fuel prices rose by 3% month-on-month in July, which will help push up inflation.
Meanwhile in Northern Ireland, SSE Airtricity jacked up the price of the gas it sells to households by nearly 43%, while Power NI increased electricity prices by more than 27%.
Northern Ireland is not covered by the Ofgem price cap as its gas and electricity system is closely linked with the Republic of Ireland.
CMC Markets analyst Michael Hewson said that inflation in the US has started to retreat from its 40-year peaks.
Experts think that the measure could dip in August before soaring again in September and October.
“Looking ahead, CPI inflation probably eased in August largely due to a 7% or so month-to-month fall in motor fuel prices,” Mr Tombs said.
He added that retailers are expected to slow the pace of their price rises soon.
He added: “But the relief for households will be short-lived, due to the impending 80% or so jump in Ofgem’s price cap. This could push up inflation by nearly four percentage points in October.”
Chris Page, who chairs pressure group Railfuture, said: “The Government claims that the fare rise will be below inflation, but the devil will be in the detail.
“They won’t say what the increase will be, or which fares it will apply to.
“If the Government was serious about tackling the cost-of-living crisis it would make rail travel much more affordable and make it easier for people to use cars and planes less.”
Economist David Blanchflower, an external member of the BoE’s interest rate-setting Monetary Policy Committee from June 2006 to June 2009, said the public were “going to need” greater Government assistance.
He told the BBC: “What happened in 2008, what happened in 2020 (is) basically the Treasury stepped in and started to help people in a variety of ways, through the health service, through childcare, through all kinds of things. And that’s what we’re going to need.”
