CPI data surprises yet again, with core inflation hitting 30 year highs; All eyes on the BOE rate decision
Today’s Consumer Prices Index reading has shown prices rose by 8.7% in the year to May, matching the 8.7% recorded in April, the Office for National Statistics has reported. Worryingly, that is higher than the 8.4% inflation rate forecast by economists, and now adds more pressure onto the Bank of England to keep raising interest rates, with inflation over four times above the BoE’s 25 target.
Removing volatile factors such as food and energy (Food up by 18.3% over the last year, energy up by 12.1% over the last year) underlying inflation increased to 7.1% per year in May, up from 6.8% in April, and higher than expected. That’s highest rate of core inflation since March 1992, which will alarm the Bank of England.
To compound the negative news; The ONS announced this morning that the UK’s public sector debt has reached more than 100% of economic output for the first time since 1961, as government borrowing more than doubled in May.
Attention now turns to tomorrow’s B.O.E rate decision, where they are now expected to hike by 50bps, up from original expectations of 25bps. The central bank has already pushed through 12 consecutive rate hikes since December 2021, when borrowing costs had been set at a record low of 0.1% to support the economy through the Covid pandemic.
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