Yet more 40-year record inflation figures for July 2022 were released today for the UK by the Office for National Statistics (ONS).
UK Consumer Prices Index (CPI) went double digit and increased massively in July 2022 by 0.7% to 10.1% pa (9.4% in June, 9.1% in May, 9.0% in April, 7.0% in March, 6.2%pa in February, 5.5%pa in January) and the old measure of inflation, the Retail Prices Index (RPI) increased 0.6% pa from 11.7% to 12.3% pa.
The ONS put the continued inflationary rises down to increased costs for holiday season items such as recreation, restaurants, and hotels:
Some items did fall but most went up:
Old Inflation Measure - Retail Prices Index (RPI)
The old measure of inflation RPI, an arithmetical mean of the average prices of a basket of household spending, accelerated to yet another painful 40 year high of 12.3% pa (up from 11.8% in June, 11.7% in May, 11.1% in April, 9.0% in March, 8.2% pa in February, 7.8% pa in January). Some commentators are predicting this could hit 18% pa, taking us back to the crisis of the late 1970s.
Bank of England Action Finally
The Bank of England made its first significant move two weeks ago with a base rate increase double that of what it normally does at 0.5%pa taking rates up to 1.75% pa in August. As you know, we believe much higher rates are needed to tackle inflation and even the Bank suggests inflation is unlikely to hit its 2.0% pa target within the next 2 years.
You know our view: Too little, too late. These are ‘smoke and mirrors’ actions as globally, most governments need high inflation to devalue covid-19 borrowing over the next 20 years or so before it is due to be repaid. Never forget, no action is being taken in the UK to actually reduce prices e.g., the government is not reducing its tax take on fuel and energy and merely giving people a £400 energy grant or additional cost of living hand outs to low-income households. This tells us they want these higher prices to remain and become the new ‘norm’ only then to wait for wages to catch up and then ‘all is well’ again as wages catch up and government debt is devalued.