Headline inflation was higher than forecast by a Reuters poll of economists, and food inflation is now at a 14-year high. “All eleven categories of food and non-alcoholic drinks contributed upwards to the change in the annual rate of inflation, where prices rose overall this year but fell a year ago,” the ONS said. The biggest upward contributions came from bread and cereals and milk, cheese and eggs, with notable price increases in cheddar cheese and yoghurts. On a monthly basis, the consumer price index rose 0.6% in July, compared with no change a year ago. Higher petrol and diesel prices, along with rising air fares, are also to blame, the ONS added. The higher-than-expected reading will keep pressure on the Bank of England to follow last month’s biggest rate hike in 27 years with further rate hikes despite growing signs of pressure on household budgets and signs that the UK economy. went into recession. Data released last week showed the country’s GDP fell by 0.1% in the second quarter of this year. And Tuesday’s official labor market report found that wages rose by 4.7% between April and June, meaning average earnings fell by 3% over the period once inflation is taken into account – the biggest fall in real wages since the ONS started keeping records over 20 years ago. Inflation is forecast to rise even further later this year due to further rises in regulated energy bills in October. Electricity prices have already risen 54% and natural gas prices 95.7% in the 12 months to July 2022 due to soaring wholesale costs, exacerbated by Russia’s invasion of Ukraine in late February. UK government officials are reportedly considering options to provide more support to households. But Liz Truss, the front-runner to succeed Boris Johnson as the UK’s next prime minister in early September, has yet to produce a detailed plan beyond promised tax cuts. The opposition Labor Party is calling for an extension of a windfall tax on UK oil and gas companies to fund a freeze on household heating bills this winter. — Anna Cooban and Rob North contributed to this article.
