The rate of UK inflation is hitting 2.5% from this year to June. It is the highest in nearly three years as the unlocking of the UK economy is continuing. The Consumer Price Index measure of inflation has risen to 2.1% in May, the Office for National Statistics says. It is getting the impact from the higher food and the fuel costs. It is fueling up the debate regarding the up and down of the interest rate.
The food from the shops and the other eating and drinking services are costing more. On the other hand, the clothing and the footwear are cheaper at this time. Second-hand car prices rose within May and June of this year. But in recent years, they had fallen between these months, an ONS says.
Some of the buyers have reported turning to the used car markets due to the delay in the supply of the new cars. There are shortages in semiconductor chips which are essential for production.
The reading of June was about most of the forecasts of the economists with an increase of 2.2%. The ONS deputy national statistician for economic statistics Jonathan Athow says, “The rise was widespread, for example coming from price increases for food and for second-hand cars, where there are reports of increased demand.”
He continued, “Some of the increase is from temporary effects, for example, rising fuel prices which continue to increase inflation, but much of this is due to prices recovering from lows earlier in the pandemic.”
The increase in the price for the clothing and the footwear is compared with the normal seasonal pattern of the sales in summer. It is also adding upward pressure this month.
The Retail Prices Index inflation is an older measure. It is important to measure and calculate the cost of living increase. It rose to 3.9% in June.
The last rise in the inflation rate will add more pressure to the Bank of England for considering the rates to cool down the economy. The Monetary Policy of the Bank’s rate-setting is taking the view that the current inflation is transitory. It will fall back to 3%. Samuel Tombs, the UK economist, thinks that inflation would likely reach 3% and not more than it. The interest rate will remain at 0.1% next year. The economy will ease quickly in 2022, according to his forecast.
However, it is difficult to pass the costs to the customers who are unable to pay more. While in lockdown, people are losing jobs; this inflation is very painful.