By The latest temperature check of the UK economy shows the mercury rising again, with no end yet in sight to feverish price rises.
The Bank of England has already forecast that inflation will hit 11% by the Autumn, and it’s steadily creeping towards that ugly marker.
The last time inflation had been at the horrible height of 9.1% it was in March 1982, when the group Tight Fit were at the top the charts, an apt name given that then, like now, the squeeze on incomes was such a strain for consumers.
In contrast though interest rates were at 13% back in March 1982, whereas today they stand at just 1.25%.
With the economy taking on more of a sweat, the pressure is now on the Bank of England to apply much cooler compresses in the form of successive interest rate rises over the next few months to try and reduce demand and bring down prices.
May’s rise in inflation was smaller compared to the jump we saw in April, so although the pace of rate rises looks set to continue, the Bank may hold off from bringing in a larger hike of 0.5% for the time being.
The pound has slipped back against the dollar, down to $1.22 compared to $1.23 earlier yesterday and worries are mounting that this could flame inflation further by making imported goods even more expensive.
The bounce in US stocks after Monday’s holiday shows signs of being short-lived given that there was no major data out to support an ongoing buying spree.
US futures point to a lower open for Wall Street, an indication that pessimism is seeping back into investor sentiment about the Federal Reserve’s ability to cool down inflation without inducing a cold shock for the US economy.
With worries resurfacing about a global slowdown the oil price has fallen sharply.
The benchmark Brent crude has dropped by more than 3% heading towards $110 a barrel.
The surging oil price is a major culprit of the painful rises companies and consumers are having to deal with right now so the retreat of oil will be welcomed.
However supply concerns are set to conspire to keep it elevated given that intense fighting continues in Ukraine, and there little end in sight to this entrenched war.
So the shock of filling up at the forecourts isn’t likely to fade any time soon given that Brent crude is still almost 40% higher since the start of the year.
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