Food prices push UK inflation to 40-year high of 9.1% Business and Economic News

The Bank of England said the worse was yet to come as the UK had the highest inflation rate of the G7 countries.

Rising food prices pushed UK consumer price inflation to a 40-year high of 9.1% last month, the highest among G7 nations.

Historical records from the Office for National Statistics show that the inflation rate in May was March 1982 – Worse may be to come.

Sterling has been one of the worst performers against the dollar this year, falling 0.6% on the day to below $1.22.

Some investors see Britain at risk of persistently high inflation and recession, reflecting its large imported energy bill and ongoing Brexit problems that could further damage trade relations with the European Union.

“With the economic outlook so uncertain, no one knows how high and how long inflation will last — making fiscal and monetary policy judgments especially difficult,” said Jack Leslie, senior economist at the Resolution Foundation think tank.

Earlier on Wednesday, the Resolution Foundation said the blow to household living costs had been exacerbated by Brexit, making Britain a more closed economy, with damaging long-term effects on productivity and wages.

Headline inflation in the UK in May was higher than in the US, France, Germany and Italy. While Japan and Canada have yet to release consumer price data for May, neither is likely to come close.

The Bank of England said last week that inflation is likely to remain above 9% in the coming months before peaking at just over 11% in October, when regulated household energy bills will rise again.

Chancellor of the Exchequer Rishi Sunak said after the data was released that the British government was doing everything it could to deal with the surge in prices.

Prices of food and non-alcoholic beverages rose 8.7% in May from a year earlier, the biggest gain since March 2009 and making the category the biggest driver of annual inflation last month.

Headline consumer prices rose 0.7% on the month in May, slightly above the 0.6% consensus, the ONS said.

UK factory prices – a key determinant of what consumers later pay in stores – were 22.1% higher in May than a year earlier, the biggest rise since those records began in 1985, the ONS said.

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