Inflation stays at 'historically high level' despite hopes of fall

It was expected the rate of inflation would slow but levels have remained unchanged for two months.

UK inflation stays at ‘historically high level’ despite hopes of fall, ONS finds STV News

The rate of inflation in the UK has remained at “historically high levels”, according to the latest statistics, despite expectations it would fall.

The Office for National Statistics (ONS) said Consumer Prices Index inflation (CPI) was at 8.7% in May, the same as it had been in April.

The news is likely to put more pressure on the Bank of England to raise interest rates further, which could make mortgages and other types of borrowing more expensive.

The ONS said the prices of plane tickets, live music and computer games had hit households during the month.

But it said the price of petrol and diesel had fallen compared with a year ago.

Overall, households are paying around an extra £8 for every £100 spent, compared with the same time last year.

The ONS said the increase in food prices slowed from 19.1% in April to 18.4% in May after hitting a 45-year high in March.

But that is still more than double the general cost of living.

That means that a food shop that would have cost about £60 last year would now cost more than £70.

The rise in the prices of milk, cheese and eggs have all slowed but the increases from last year are still very high.

The cost of bakes beans has increased by 41% since last May, while olive oil has gone up 47%. Granulated white sugar saw the biggest rise at 51%.

And cheddar cheese is still 38% more expensive than this time last year, according to the ONS.

Food inflation continues to far outpace the general cost of living.iStock

Supermarkets have been under pressure to cut prices as food inflation is around double the general cost of living.

Sainsbury’s, along with Tesco, Asda, Aldi and Lidl, has already slashed the prices of essentials such as milk, bread and butter in response to decreasing inflation rates for those products.

And earlier this week, Morrisons announced it had slashed the price of 47 items by more than a quarter on average.

Sainsbury’s meanwhile cut the price of its own-brand toilet paper.

But the general inflation figures mean households will continue to pay more across the board.

The news means added pressure for households.

Figures from the Money Advice Trust show that since March 2022 the number of adults who are behind on one or more household bill has risen from 7.9 million to 11.6 million.

ONS chief economist Grant Fitzner said: “After last month’s fall, annual inflation was little changed in May and remains at a historically high level.

“The cost of air fares rose by more than a year ago and is at a higher level than usual for May.

“Rising prices for second-hand cars, live music events and computer games also contributed to inflation remaining high.

“These were offset by a fall in the cost of petrol.

“Food price inflation remains high, but the rate has eased slightly this month with costs rising more slowly than this time last year.”

The news is likely to put more pressure on interest rates too. Decision-makers at the Bank of England are meeting this week to look at rates.

The bank is tasked with keeping inflation as close to 2% as it can, and the best tool it has to do that when inflation is high is by putting up interest rates.

But this is likely to pile even more pressure on mortgage-holders as rates are already at close to 15-year highs.

The likelihood of the bank hiking rates further will be exacerbated by so-called core CPI, which rose to 7.1% in May from 6.8% in April.

The figure – which excludes the price of energy, food, alcohol and tobacco – is often more in focus for the bank’s decision-makers when they set interest rates.

Liberal Democrat Treasury spokeswoman Sarah Olney said: “These worse-than-expected figures show the Government is failing miserably to bring inflation down and provide relief for struggling families facing soaring bills.

“Home-owners now face the likelihood of even more interest rate hikes adding to their monthly mortgage payments, all while the Chancellor just sits on his hands.”

Chancellor Jeremy Hunt said the Government would “stick to its guns” and insisted patience was needed for Bank of England rate rises to curb inflation.

He told broadcasters: “Today’s figures strengthen the case for the Government to stick to its guns.

“No matter what the pressure from left, right or centre, we won’t be pushed off course.

“Because if we are going to help families, if we are going to relieve the pressure on people with mortgages, on businesses, we need to squeeze every last drop of high inflation out of the economy.”

The ONS said the Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose to 7.9% in May, up from 7.8% in April.

The Retail Price Index (RPI), which is used to calculate the rise in train fares among other things, dropped from 11.4% in April to 11.3% in May.

To set inflation figures, the ONS tracks the prices of dozens of different items that households buy.

Wednesday’s CPI figures mean that a shop which cost around £100 a year ago would cost around £108.70 today.

Inflation has been falling in recent months, but a lot of that is simply due to the way that the figure is calculated.

Prices are measured against where they were a year before.

That means that while inflation rates have fallen, part of this is because today’s inflation figures are being compared against a time when costs had already risen.

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