Borrowers have been put on notice for further Bank of England interest rate rises after inflation in the UK unexpectedly remained stuck at 8.7% in May, adding to the pressure on households suffering a surge in mortgage costs.
Figures from the Office for National Statistics (ONS) showed annual inflation as measured by the consumer prices index was unchanged last month from the rate in April. City economists had forecast a figure of 8.4%.
In a shock report that underscored the challenge facing the central bank to curb the highest rates of inflation in decades, energy prices stabilising at record levels were offset by a sharp rise in the cost of air fares and package holidays as consumers rushed to book overseas summer travel.
Rising prices for secondhand cars, live music events and video games also contributed to inflation remaining high.
The financial markets reacted to the figures by betting the Bank would raise interest rates by at least a quarter point on Thursday from the current level of 4.5%, with as much as a 40% probability of a tougher half-point increase to 5%. The central bank has already pushed through 12 consecutive rate hikes since December 2021, when borrowing costs had been set at a record low of 0.1% to support the economy through the Covid pandemic.
Core inflation – a measure that excludes volatile food, energy, alcohol and tobacco prices, and which is closely watched by the Bank – rose from 6.8% in April to 7.1% in May, the highest level since 1992.
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Source: www.theguardian.com
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