Rising petrol and food prices pushed British inflation to its highest rate in 40 years last month, according to official figures, raising the prospect of a half-percentage point rise in the Bank of England’s interest rate next month.
The Office for National Statistics said inflation rose to 9.4% in June, the highest level since February 1982, up from 9.1% in May and above the 9.3% consensus in a Reuters poll. among economists.
The latest rise means Britain has had the highest rate of inflation of any advanced Group of Seven economy since 1985, although many smaller countries in the European Union are currently experiencing even faster price growth.
How do we stop inflation from rising?
The data reinforced bets that the BoE would opt for a 50 basis point rate hike next month, which would be the biggest since 1995. The European Central Bank is considering such a measure this week, sources said on Tuesday Reuters.
The BoE has raised rates five times since December in a bid to stem rising inflation, and is expected to raise them again on August 4.
Investors now see a nearly 100% chance that the BoE will raise the Bank Rate to 1.75% from 1.25% next month.
The ONS pointed to a 42% year-on-year rise in petrol prices and a nearly 10% rise in food prices as the main causes of last month’s inflation, hitting low-income families hard.
The Resolution Foundation think tank said inflation for this group had already moved into double digits.