That pledge now looks far less likely than it did back in January. The prime minister pledged earlier this year to halve inflation. Higher inflation and mortgage rates are likely to be one of the big factors in the coming election. However those who've paid off their mortgages and are net savers will see an increase in their fortunes (though banks are always slower to pass on savings rates than to put up borrowing rates). This will be very painful for households with mortgages and may have a bearing both on the housing market and the wider economy. A couple of months ago those Bank rates were expected to peak at around 5%. The first is that the Bank of England's Monetary Policy Committee will certainly raise interest rates again in the coming months, putting further pressure on mortgage borrowers. While it's possible that prices fall sharply later on this year, that likelihood diminishes with every month that core inflation remains so high. And all the signs suggest that that is precisely what is happening: what began as a rise in one-off, explicable prices seems to be turning into a stickier phenomenon. It pays more attention to these underlying adjusted measures, which give you more of a sense of whether price rises are becoming embedded in the economy. This will all unnerve an already nervous Bank of England. ![]() Instead, it stayed precisely where it was in April.Įven worse, the core rate of inflation, which is what you're left with when you strip out volatile stuff like fuel and food, actually rose from 6.8% to 7.1%. Economists thought the headline inflation rate - the consumer price index annual rate - would drop in May from 8.7% to 8.4%. Then the official data comes in and it turns out prices are not falling as fast as predicted. Economists predict the rate at which prices are rising will finally begin to fall, and fast. The last few months of inflation data have had a dreary and repetitive rhythm to them. Analysis by Ed Conway, data and economics editor
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