Inflation nearly double 2% target
The growing costs of food and fuel has driven inflation up to 3.8% in June, which is nearly double the 2% target.
Food inflation has increased to 10.6%, up from 8.7% in May, primarily due to the rising costs of meat.
Meanwhile, petrol prices have increased significantly with the average cost of petrol rising by 5.3 pence per litre between May and June this year, compared with a rise of 1.3 pence last year.
As a result, the chances of a cut in interest rates are now slim. According to James Knightley, economist at ING, until the Bank of England is convinced that inflation is falling, it won’t cut rates.
During June, the cost of food and non-alcoholic beverages increased 2.1%, which meant the annual rate of growth was pushed up to 9.5%, up from 7.8% in May.
Meanwhile, the price of holidays, DVDs, computer games and digital cameras also increased.
However, a fall in prices has been noted in clothing, shoes and alcohol. According to the Office of National Statistics, the cost of spirits fell this year after rising last year while the price of wine rose more slowly than last year.
According to some economists, the situation could deteriorate. Jonathan Loynes of Capital Economics, explains that there could be worse to come. Inflation could be heading towards 4.5% or as high as 5% by the autumn.
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