It isn’t just the weather that is running hot at the moment. The latest inflation figures call to mind an old Sun headline ‘Phew, What a Scorcher’.
Prices rose by a higher than expected 9.4% in June.
This was marginally higher than the 9.3% predicted for June, but not sufficiently outside the scope of economists’ expectations to set alarm bells ringing.
Higher petrol and diesel prices were the main drivers of rising costs, though shopping basket staples such as cheese, butter and vegetables also contributed to the cost of living squeeze.
The headline rate of inflation is expected to hit 11% by the end of the year.
The upshot for the latest figures, the knock-on as it were, is that base rates are almost certain to go up in August.
In fact, Andrew Bailey, the Bank of England governor, on Tuesday primed the market saying a half a percentage point hike to base rates is on the table at next month’s gathering of the Monetary Policy Committee.
“[The BoE] faces the supremely tricky task of rapidly cooling down prices, without pushing growth into the deep freeze,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.
“The economy sorely needs to be doused by a bucket of ultra-cold water, but the labour market is still red hot and promises of tax cuts by Prime Ministerial contenders risk seeing prices staying elevated as demand for goods and services is kept higher.”
On the BBC earlier Simon Clark (who?), chief secretary to the Treasury (this week), called the current backdrop "challenging", though he said he was looking for a “marked improvement” next year.