Households have been warned that the price of everyday items might increase even further than previously thought after the Bank of England raised interest rates in a bid to contain soaring inflation.
In a widely expected move, the Bank’s monetary policy committee (MPC) voted to increase its key base rate by 0.25 percentage points to 1.25 per cent in response to living costs rising.
it is the fifth time in a row that the Bank of England has raised interest rates to tackle an inflation rate that is heading towards 11 per cent amid soaring household energy bills.
The cost of living has been soaring for months, with consumer prices index (CPI) inflation hitting a 40-year high of 9 per cent in April when the energy price cap was hiked.
But things are set to get even worse later this year, the Bank warned.
Experts currently expect that regulator Ofgem could put up energy prices even further, from £1,971 per year to around £2,800.
This, alongside other pressures in the economy, could lead to inflation topping 11 per cent in October, the Bank said.
It also said it was ready to “act forcefully” if required, signalling further rate rises in the coming months.
In a shot across the bows of Chancellor Rishi Sunak the Bank said “not all excess inflation can be attributed to global events”
The Bank said almost all categories of goods and services were showing elevated inflation but that this is especially case for the UK, where core inflation is eight per cent, compared to 3.8 per cent in the Euro area and 6.4 per cent in the USA.
Pat McFadden MP, Labour’s Shadow Chief Secretary to the Treasury, said: “This underlines the seriousness of the situation facing the economy. Many families will be worrying about the impact this will have on their household bills.”
“We need a plan for a stronger, more stable economy, that can weather the short-term issues and fix the foundations for the long-term.”
A report by the Institute of Grocery Distribution (IGD) has warned that he average monthly grocery bill for a typical family of four will reach £439 from next January - a big jump from £396 in the same month this year.
James Walton, the IGD’s Chief Economist, stated that: “If average food bills go up 10.9 per cent in a year, a family of four would need to find approximately £516 extra per year. We are already seeing households skipping meals – a clear indictor of food stress.”
SNP Treasury spokeswoman Alison Thewliss MP said: “The UK government cannot sit back after its earlier support package and clean its hands of this crisis. It must urgently step up to the scale of the cost-of-living crisis that is forcing people to choose between heating or eating.”
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