UK inflation stays at 8.7 percent

UK inflation remained at 8.7 percent in the 12 months to May, according to the Office for National Statistics’ (ONS) Consumer Price Index (CPI).

The ONS report revealed rising prices for air travel, recreational and cultural goods and services, and second-hand cars were principal contributors to the stubbornly high annual rate. A decline in the cost of motor fuel, on the other hand, represented the most significant downward trend.

The headline figure came as a surprise to many analysts, with economists polled by Reuters predicting it would fall to 8.4 percent. It also means that Britain has the highest inflation of any major advanced economy. For comparison, eurozone inflation stands at 6.1 percent, while US inflation dropped from 4.9 percent to 4 percent in April.

As a result, the Bank of England’s monetary policy committee is likely to raise interest rates again when it meets on Thursday – increasing the cost of borrowing at a time when many households are struggling to meet spiralling mortgage payments. On Tuesday, journalist Martin Lewis described the impact of rising interest rates on mortgages as a “ticking timebomb”.

For its part, the government supports the Bank’s strategy. Reacting to the latest ONS data, the chancellor of the exchequer, Jeremy Hunt, said: “We will not hesitate in our resolve to support the Bank of England as it seeks to squeeze inflation out of our economy, while also providing targeted support with the cost of living.”

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