Inflation reaches eyewatering 9% but worst is yet to come
The Consumer Prices Index (CPI) measure of inflation jumped from 7% in March to 9% in the year to April.
According to the Office for National Statistics (ONS), the largest upward contributors were from gas, electricity and fuel, followed by transport, namely the rising cost of second-hand cars.
This time last year, inflation stood at 1.5%, and the 9% April figure is the highest level in 40-years.
However, it came in a touch under the economic consensus of 9.1%.
Nonetheless, this “heaps more misery on households” and highlights the pressure on the Bank of England to keep raising interest rates, according to economic consultancy Capital Economics.
Chief UK economist, Paul Dales, said they expect the base rate to rise from 1% now to 3% next year.
Dales added: “The bulk of the increase in April was driven by the 54% jump in Ofgem’s price cap on 1 April, which translated into a 47.5% m/m rise in overall utilities prices and raised utilities price inflation from 24.8% to 69.6%.
“The rise in petrol prices to a recent record high of £1.75 per litre also contributed, with fuel price inflation rising from 30.7% to 31.4%. And the increases in commodity prices also pushed up food price inflation, from 5.9% to an 11-year high of 6.7%. A lot of these moves are due to global factors that have further to run.”
As such, many suggest things will get worse before they get better, particularly as the Ofgem energy price cap is set to be hiked in October, and further in January 2023 if wholesale energy prices fail to stabilise.
Dales added it expects inflation to reach 10% in October.
Myron Jobson, senior personal finance analyst at Interactive Investor, said: “Household budgets are crumbling under the pressure of spiralling inflation, driving many to breaking point. There is nowhere to hide for consumers as inflation has been most acute on unavoidable household costs like food, energy, housing and transportation.
“Runaway inflation means that many households are being forced to make tough decisions on their spending on a daily basis.”
However he added that inflation doesn’t impact everyone equally as we don’t all spend money on the same things.
“We all have a personal inflation number that is unique to us and could be far higher than the catch-all headline figure. Escalating inflation means that we are all spending more on the same things. Keep tabs on your spending to get a better idea of how exposed your back pocket is to inflation is crucial,” he said.
Commenting on the inflation figure which comes in way above the 2% target, chancellor of the exchequer Rishi Sunak admitted the government can’t fully protect people from the global challenges.
It comes just days after the Bank of England governor, Andrew Bailey, was grilled by MPs on the soaring inflation figure where he said people face apocalyptic food prices, adding that he felt helpless against the rise in the cost of living.