Senior Tory calls for halt to interest rate hikes after latest inflation figures

author: FutureCar Staff    

There are signs that the inflation crisis in the UK may be coming to an end as prices in shops have started to slow significantly. This could potentially allow the Bank of England to stop raising interest rates. While the cost of retail items continues to increase, the rate of inflation has dropped to its lowest level in nearly a year.

The British Retail Consortium (BRC) reported that prices in August were up 6.9% compared to a year earlier, down from a rate of 8.4% in July. Treasury officials believe that the slowdown in shop inflation is a result of lower energy and commodity prices, which are now being reflected in more moderate increases in costs to shoppers.

Consumer price inflation, which includes both goods and services, stood at 6.8% in July and was expected to rise slightly in August. If it falls again, it could put pressure on the Bank of England to limit future interest rate rises. Some experts warn that the Bank has been raising rates too quickly and that pauses are needed to assess the impact on the economy.

There is a debate among economists about the next interest rate increase. Most believe that the Bank will raise rates to 5.5% next month, with some even calling for a larger increase to 5.75%. However, others are concerned that higher interest rates could lead to a recession by reducing economic activity.

The BRC highlighted that fresh food prices rose by 11.6% over the past year, down from the July rate of 14.3%. Food costs have been a major driver of overall inflation, as producers pass on the cost of more expensive energy and other goods to consumers.

Helen Dickinson of the BRC mentioned that shop price inflation in August eased to its lowest level since October 2022, particularly driven by falling food inflation. However, she noted that the figures could have been even lower if the Government had not increased alcohol duties earlier in the month.

Rishi Sunak has pledged to halve the rate of inflation this year, although prices will still remain significantly higher than before the economic crisis. On a positive note, average wages are now growing faster than prices, indicating that living standards are no longer declining.

The Bank of England has been raising rates consistently since late 2021 but is uncertain about the real-world impact of these increases on the economy.

FutureCar Staff