Inflation is heating up but don't expect another crisis
Rising living costs could heap pressure on PM Andy Burnham though it depends what happens in the coming months.
Inflation has been escalating due to the Iran war, causing higher energy bills for households. However, despite food prices being 33% higher than four years ago, economists have been less concerned than initially thought. Inflation has been more moderate than anticipated, as energy costs have not significantly impacted food prices, which are currently at their lowest in nearly five years.
Additionally, wages and benefits have been outpacing inflation, alleviating some financial pressures. Nonetheless, existing energy costs may lead to further price increases in the coming months as they trickle through supply chains. Economists predict inflation to rise to approximately 3.5% later in the year, which could challenge the new Prime Minister Andy Burnham and his Chancellor John Healey to provide additional support ahead of the Budget.
While energy bills are expected to increase by the end of October, they will still be about £1,000 lower than the peak reached after Ukraine's war started. The Bank of England expects inflation to return to its 2% target in the medium-term, but the moderate food inflation could give them hope that price pressures remain contained.
However, the conflict in the Middle East poses the biggest risk, as a prolonged conflict could disrupt energy markets and push inflation higher than expected.
Written by urgent.news from BBC Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
