Published By: Mathew White
On Tuesday 12 August 2008 |
Inflation has risen to 4.4 per cent - more than twice the Government's target - official figures show.
The Consumer Prices Index is up from 3.8 per cent in June to the new high last month. The 0.6 per cent leap is the biggest monthly jump since records began in January 1997.
The figures were driven by a hefty 13.7 per cent increase for food costs, with bread prices surging 15.9 per cent during the year, meat products by 16.3 per cent and milk, cheese and eggs by 19 per cent. Coffee and tea were 5.6 per cent higher.
Electricity and gas are both running at 12 per cent higher than a year ago and oil's relentless price rise has also fuelled the growth.
The Government wants to keep the figure down to 2 per cent and the latest increase piles more pressure on the Bank of England and significantly reduces the chance of an interest rate cut.
Indeed, Global Insight economist Howard Archer warned that the sharp spike in inflation could lead to a rise in interest rates.
"This is a really disturbing set of data that will not go down at all well at the Bank of England," he said.
"The rise in consumer price inflation to a series high of 4.4 per cent in July was well above expectations. Furthermore, the rise cannot be attributed solely to sharply higher food and energy prices."
Vicky Redwood, of Capital Economics, added: "Even with the recent drop in oil prices, it still looks possible that inflation will hit 5 per cent within two or three months as the latest round of utility price hikes affects the index."
The figures from the Office for National Statistics also revealed that the underlying rate of Retail Prices Index inflation rose to 5.3 per cent in July from 4.8 per cent in June and the headline rate of RPI inflation, which includes mortgage interest payments, rose to 5 per cent from 4.6 per cent.
