Fears for British economy as inflation soars to 11-year high
FEARS for the British economy mounted today as surging food and and petrol prices pushed inflation to a 11-year high of 3.8 per cent.
Families who are feeling the squeeze were dealt another blow as the Consumer Prices Index (CPI) jumped this month from 3.2 per cent in May.
The highest increase in more than a decade was worse even than the 3.6 per cent expected by City economists and is almost double the Bank of England's 2 per cent target.
EXPRESS VIDEO: BANK OF ENGLAND GOVERNOR EXPLAINS WHY INFLATION IS SO HIGH
And it means more misery for home owners as the Bank has less breathing space to cut interest rates despite mounting signs of economic slowdown, which have prompted fears over a recession.
A record rise in food prices - as much as 7 per cent - was one of the main factors behind the inflation jump.
Annual food inflation is running at almost 10 per cent, with the biggest price hikes coming for beef and sausages. Other staples like milk, bread, rice and biscuits have seen their prices rocket.
The cost of milk across a range of supermarkets has risen by around 10p for four pints and 4p for two pints.
Alongside soaring food bills, average petrol prices rose 5.3p a litre during the month to 117.6p thanks to surging oil prices.
There was no respite for those looking to escape the gloom with a holiday as package holiday costs rose this year.
Jonathan Loynes, chief European economist with Capital Economics, said: “We’ve been getting used to unpleasant surprises on inflation over recent months.
“But June’s further rise...will make it even harder for the MPC to deliver the cuts in interest rates the economy desperately needs.”
Bank Governor Mervyn King - last month forced to write an open letter to the Chancellor after CPI reached 3.3 per cent in May - has warned that inflation will rise above 4 per cent later this year.
But inflation is rising at such a pace that the spike is forecast to be sharper than first feared.
Shadow chancellor George Osborne said: “The official figures have caught up with everyone’s real experience of rising prices and a higher cost of living.
“Inflation is now more than double the rate that Gordon Brown inherited from the last Conservative government."
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