Britain was today hit by a double-whammy of bad news as official data showed rising prices and the International Monetary Fund predicted that Brexit would slash UK growth next year.
Government statistics showed that Consumer Price Inflation rose by 0.5 per cent in the year to June, compared with 0.3 per cent in the year to May.
The rise, meaning goods costing £100 last year now cost £100.50, was due to more expensive air fares, petrol and recreation activity including computer games and toys. At the same time the IMF today painted a gloomy picture of the economic outlook following the UK’s Brexit vote.
Britain had the largest downward revision in forecasted growth of any advanced economy, 0.2 per cent lower in 2016 and one per cent lower in 2017. European Union growth next year was also revised down by 0.2 per cent.
But the Office for National Statistics said it was too early to see the impact on inflation of the plunge in the value of the pound triggered by Britain’s decision to leave the European Union.
ONS statistician Phil Gooding said: “The rising cost of European flights, possibly boosted by the Euro championships, was the biggest reason for this increase in inflation.
The growing cost of oil, feeding through to petrol prices, also helped nudge up CPI. Today’s figures were collected before the EU referendum, so recent falls in the value of the pound will have had no impact on them.”
The Bank of England held back from cutting interest rates from 0.5 per cent this month, where they have remained since March 2009, but signalled a rate cut could come next month.
Investors and economists were taken by surprise, having expected the Bank to cut rates to 0.25 per cent after governor Mark Carney said that action would be taken over the summer.
Since then, Bank policymaker Martin Weale has questioned whether interest rates should even be slashed next month.
He said there were no signs that consumers or businesses were “panic-struck” following the Brexit vote.
Read More
MORE ABOUT