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CPI inflation rose by 9.1% in the 12 months to May, up from 9.0% in April to a new 40-year high, according to the latest ONS data. On a monthly basis, CPI rose by 0.7% in May, compared with a rise of 0.6% in May 2021. CPIH inflation, which includes owner occupiers' housing costs, saw an annual rise of 7.9%, up from 7.8% in April. Increased prices for food, transport, and electricity, gas and other fuels, were the largest contributors to rising inflation in May. The Bank of England is facing a tough challenge to balance inflationary pressures and the need for economic growth. Last week’s quarter-point interest rate rise suggests it’s pursuing a more cautious approach than many other central banks. Policymakers are clearly conscious of the risks of an entrenched wage-price spiral and have pledged to “act forcefully” if required. This raises the prospect of bigger interest rate rises on the horizon."
