INFLATION in Britain jumped to its highest in more than a year last month as higher petrol prices contributed to a steep rise in the cost of living.
Just a day after Mervyn King, Governor of the Bank of England, braced Britain for more interest rate rises with a warning of mounting price pressures, the Bank’s new inflation benchmark hit its highest since April last year. Headline consumer price inflation climbed to an annual rate of 1.5 per cent in May, up from April’s 1.2 per cent in a rise driven mainly by the cost of fuel after crude oil prices hit near-record levels.
The official figures showed that petrol prices rose last month by a hefty 4.8 per cent as the average cost of a litre of unleaded petrol hit 82p.
The increases left petrol prices up 8.2 per cent from a year earlier and accounted for about two thirds of the rise in the consumer price index.
A similar impact from the surge in fuel costs drove Britain’s other main measures of inflation sharply upwards.
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The Retail Price Index (RPI) rose at an annual rate of 2.8 per cent last month, up from 2.3 per cent in April.
Economists said that despite the outbreak of a price battle on forecourts this month, fuel could still trigger a further rise in inflation next month, but that the more recent drop in oil prices could then see inflation ease back. Analysts questioned whether the present inflation trend justified the more hawkish stance being taken by the Bank.