25th July 2022
ONS data released last month revealed that the UK’s headline rate of inflation rose to 9.4% in June, the highest recorded level since February 1982. This was up from the previous month’s rate of 9.1% and slightly higher than analysts’ expectations.
Motor fuels and food were the biggest upward contributors to June’s figure. ONS said average petrol prices rose by 18.1p per litre, the largest monthly increase since records began in 1990, while the cost of milk, cheese and eggs all climbed sharply and the price of vegetables, meat and ready meals also rose notably.
The jump in inflation increased the chances of a sixth successive rate hike when the BoE’s Monetary Policy Committee (MPC) next convenes. The MPC is due to announce its decision on 4 August, with speculation of a half percentage-point rise intensifying following recent comments by the Bank’s Governor Andrew Bailey.
During a Mansion House speech the day before June’s inflation data was released, Mr Bailey reiterated that the MPC is ready to “act forcefully” if it sees signs of greater inflation persistence. “In simple terms, this means that a 50 basis point increase will be among the choices on the table when we next meet,” Mr Bailey said.
However, the Governor also made it clear that such a rise was “not locked in”. And a Reuters poll published towards the end of July suggests the MPC’s decision will be an extremely close call, with just over half of the economists surveyed predicting a 25 basis point rise and the remainder all saying they expect a 50 basis point hike.