A big increase in food and drink prices helped push inflation in Britain up to 3.3% in May compared with the same month last year – the highest in over 10 years.
Finance minister Alistair Darling said that in the past inflation was driven by domestic factors, but now it is due to things like oil and food prices and there must be concerted international efforts to cool inflation: “What we need to do is to make sure that we work with other countries to try and get those prices down, because that is the only way we are going to get inflation down in this country as well as in every other country in the world.”
At the same time that the latest figures were released Mervyn King, the governor of the Bank of England, said inflation is “likely to rise sharply in the second half of the year, to above 4%.” He warned the UK faces a long period of low growth and rising cost pressures.
Economist and former Bank of England policymaker, Willem Buiter, said there are tough times ahead: “The only way to bring inflation down is through pain – and that pain will be through higher interest rates, lower growth, increased unemployment and greater pressure on consumers, that’s how it happens.”
The Bank of England said with oil prices having surged by over 80% in the year up to the start of June, it expects inflation to be well above its target of 2% until well into next year.