Press release

17 Aug 2022

Inflation moved into double-digits in July – EY ITEM Club comments

Inflation rose in July, with the CPI measure reaching 10.1% year-on-year (y/y), the highest since February 1982 and beating the Bank of England’s and consensus expectations. Another 50bps rise in Bank Rate in September is looking more likely and inflation is on course to head above 12% in the autumn.

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  • Inflation rose in July, with the CPI measure reaching 10.1% year-on-year (y/y), the highest since February 1982 and beating the Bank of England’s and consensus expectations. Another 50bps rise in Bank Rate in September is looking more likely and inflation is on course to head above 12% in the autumn.  
  •  Whether it gets there will depend, in part, on what more the Government does to hold down energy bills and how the ONS treats any interventions. Meanwhile, amid this news, falls in oil and some other commodity prices mean not all forces affecting prices are to the upside.   

Martin Beck, chief economic advisor to the EY ITEM Club, says: “CPI inflation rose for the sixth successive month in July, reaching 10.1%. This compared with 9.4% in June and is the first double-digit rate since February 1982, as well as exceeding the Bank of England’s (9.9%) and consensus (9.8%) predictions. Higher food prices made the biggest contribution to July’s rise, as past increases in agricultural commodity prices continued to feed through.  

“Inflation surprising to the upside increases the chances of the Bank going for another 50bps rise in Bank Rate in September. Granted, the inflationary outlook is not all bad. Recent falls in the price of oil and agricultural commodities suggest that fuel and food price inflation may have been close to a peak in July. Global shipping costs have also fallen and supply-side pressures in general have eased, pointing to core goods inflation decelerating over the next few months.  

“But as things stand, these disinflationary forces are still set to be out-balanced by the consequences for energy bills of rising wholesale gas prices. The latest estimates suggest that the typical household bill will increase from the current £1,971 to almost £3,600 in October, a rise of almost 80%, before climbing further to over £4,200 in January 2023. This would likely cause CPI inflation to exceed 12% in October and remain close to that level until next spring.  

“Whether inflation gets that high will depend on two current unknowns. The first is the scale and nature of further government aid to hold down bills. The second is whether the ONS will reflect fiscal interventions in its inflation calculations. On that subject, the ONS will announce on 31 August how it intends to treat the already-announced £400 discount on bills.”