The 0.6% jump from June to July was the largest monthly change since records began in 1997. It outpaced the government’s prediction of 4.2%. Increasing food, petrol and utility prices are driving the inflation. Food prices soared by a record 13.7% and the International Monetary Fund predicts utility prices to rise by 5%.
The Retail Price Inflation (RPI) rose from 4.6% to 5%. The RPI is used in wage negotiations, which adds to the mounting inflationary pressure and the dismay of the public sector workers over the 2% pay deal that they claim the government imposed on them.
Summer sales had little impact to hold inflation back, whilst house prices continued to fall and mortgage approvals to stumble. The core inflation, which excludes volatile items such as food and energy, increased to 1.9% from the previous 1.6%. It indicates that rising food and energy prices have a second-round inflationary effect.
It would be ill advised for the Monetary Policy Committee of the Bank of England to cut interest rates whilst inflation continues to rise. Nonetheless, the British Chamber of Commerce has warned that the Bank should move to cut rates as soon as possible in order to boost spending and stop the slowdown caused by the credit crunch.
When it is clear in the autumn that inflation has peaked, the Bank will certainly lower the interest rate. Mervyn King, the Bank of England governor, will provide more insight into prices and interest rates later this week when the quarterly inflation report is released.
Vocabulary
- to surge to – gyorsan emelkedik
- to leap to (irregular verb – leapt, leapt) – szökik
- to ward off sg – kivédeni vmit
- to outpace sg – túlnő vmin
- utility prices – közüzemi szolgáltatások árai
- wage negotiation – bértárgyalás
- public sector – közszolgálati szektor
- pay deal – bérmegállapodás
- core inflation – maginfláció
- second-round inflationary effect – másodlagos inflációs hatás
- boost spending – költést élénkíti
- to peak – csúcsra ér
- release – közzé tesz
