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ICAEW responds to today’s UK inflation figures

Author: ICAEW

Published: 20 Jul 2022

Responding to the UK inflation figures for June 2022, released by the Office for National Statistics today (Wednesday 20 July 2022), Suren Thiru, Economics Director for ICAEW, said:

“Inflation continued to heat up in June, intensifying the cost-of-living crisis and pushing the UK closer to recession.

“The acceleration in the headline rate largely reflected record petrol prices, lifted by supply concerns amid Russia’s invasion of Ukraine. Rising food prices also continued to increase the upward pressure on inflation. 

“Record producer prices confirm that businesses are experiencing an unprecedented surge in their production costs, leaving many firms with little option but to continue raising prices or to limit activity.

“While inflation may drop below 9% from August as the annual comparisons become more favourable, it is likely to soar above 11% in October as the energy price cap increases.

“The decline in core inflation suggests that deteriorating household finances are weakening domestic demand. If this trend continues, inflation could fall back quickly over the next year, particularly as the recent rises in energy prices drop out of the calculation.

“Soaring inflation means that momentum for a half-point interest rate rise in August is growing. However, tightening monetary policy too aggressively increases the risk of recession and will do little to address the global factors driving this inflationary surge.”