• CPI inflation hits 9.1% in May
• RPI inflation hits 11.7%
• The 12-month inflation rate for electricity is 53.5% and for gas is 95.5%
• Rising mortgage rates lead to the largest increase in costs for homeowners since 1999
• Double-digit inflation is just around the corner
Laura Suter, head of personal finance at AJ Bell, comments on the latest inflation rate:
“A slight uptick in inflation in May to 9.1% means that the UK public have been spared double digit inflation for now, but it’s just around the corner. RPI inflation, which is what many of us see our bills increase by every year, has now hit 11.7% -- another 40-year high.
“Once again fuel is the factor driving inflation higher, from home energy bills to petrol and diesel prices pushing up transport costs. As a result of rising energy costs, the 12-month inflation rate for electricity is 53.5% and for gas is an eye-watering 95.5%. And May saw another record broken, with the largest increase in transport costs since records began in 2006. As a result of petrol and diesel prices hitting new records in May, the 12-month inflation rate for motor fuels hit the highest rate since 1989 – when the figures were first calculated.
“But it’s not just energy bills increasing, prices are rising across the board. Soaring food costs are also playing their part, with the annual supermarket bill estimated to have risen by almost £400 as a result. Hardest hit were bread, cereals and meat, as they all suffered from the impact of the Ukraine/Russia crisis on grain supplies. Food inflation is expected to increase again in June’s figures, partly due to the ongoing increase in prices and partly because the nation splashed out on fancier food during the Jubilee celebrations.
“Another factor bumping up inflation in May was mortgage costs, with the successive Bank of England base rate hikes pushing up mortgage rates and leading to the largest increase in costs for homeowners since 1999. These costs will continue to increase this year, as we see the impact of the latest rate rise filter through to mortgage rates and push up costs for those re-mortgaging or first-time buyers.
“Unfortunately, more gloom lies ahead, and the hopes of inflation ebbing away later this year are dead. Energy costs will drive inflation higher later this year, with the latest estimates showing that the energy price cap will now rise to £3,000 in October, far more than many had expected, and that it won’t fall in the January update either. It means one thing is for certain, this rising inflation isn’t going away any time soon and this coming winter could be tougher than the last.”
