Higher inflation, slower consumer demand and rising rates will likely result in slowing economic growth.
Rising food and fuel costs helped push UK inflation higher in June with CPI coming in 9.4% higher than a year ago, a tad ahead of expectations of a 9.3% rise year-on-year. With wages rising much more slowly, the painful inflationary grip on the UK consumer continues to tighten. This 40-year inflationary high will remain in place for much of the second half of this year and will likely push and possibly even break the Bank of England’s (BoE) target of 11% in October when another energy price hike is pushed through. While base effects will eventually see inflation begin to plateau, it has not yet and continued cost of living pain will likely push the BoE to act aggressively in August, possibly hiking rates by 50 bps. High inflation, slowing consumer demand and rising rates can only have the effect of slowing economic growth.
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