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| UK consumer inflation up to 3.3% | UK consumer inflation up to 3.3% |
| (10 minutes later) | |
| Rising food and energy prices have pushed UK consumer inflation to its fastest rate since the measure began in 1997, government figures have shown. | Rising food and energy prices have pushed UK consumer inflation to its fastest rate since the measure began in 1997, government figures have shown. |
| The Consumer Prices Index (CPI) measure of annual inflation was 3.3% in May, up from 3% the previous month, said the Office for National Statistics (ONS). | The Consumer Prices Index (CPI) measure of annual inflation was 3.3% in May, up from 3% the previous month, said the Office for National Statistics (ONS). |
| The rise means that the Bank of England governor must explain to the chancellor its policy for controlling price rises. | The rise means that the Bank of England governor must explain to the chancellor its policy for controlling price rises. |
| The wider Retail Prices Index rose to 4.3% from 4.2% in April. | The wider Retail Prices Index rose to 4.3% from 4.2% in April. |
| The biggest contributor to consumer inflation was the rising price of food and non-alcoholic drinks, the ONS said. | The biggest contributor to consumer inflation was the rising price of food and non-alcoholic drinks, the ONS said. |
| One family counts the cost of recent price rises | One family counts the cost of recent price rises |
| This was mainly due to the increasing cost of meat products, particularly bacon, and vegetables. | This was mainly due to the increasing cost of meat products, particularly bacon, and vegetables. |
| Increasing household energy bills were also a significant factor, along with the rising cost of books, stationery and foreign holidays. However, this rise in the cost of leisure and recreation was offset by a fall in the price of DVDs, according to the ONS. | Increasing household energy bills were also a significant factor, along with the rising cost of books, stationery and foreign holidays. However, this rise in the cost of leisure and recreation was offset by a fall in the price of DVDs, according to the ONS. |
| Further rises? | Further rises? |
| If inflation rises more than one percentage point above the government's 2% target, the Bank of England governor must write a letter to the government to explain what action it is taking to control consumer prices. | If inflation rises more than one percentage point above the government's 2% target, the Bank of England governor must write a letter to the government to explain what action it is taking to control consumer prices. |
| In his letter to the chancellor, Mervyn King blamed sharp rises in the prices of food and energy for the increase in the rate of inflation. | |
| As things stand, inflation is likely to rise sharply in the second half of the year, to above 4% Mervyn King, Governor of the Bank of England Are you feeling the credit crunch?Viewpoint: Sir Alan Budd | |
| He also suggested that prices will rise at a faster rate in the coming months. | |
| "As things stand, inflation is likely to rise sharply in the second half of the year, to above 4%," Mr King told the chancellor. | |
| "I must stress however, that there are considerable uncertainties, in both directions, around this, and any such projection is particularly sensitive to changes in domestic gas and electricity prices," he said. | |
| The Bank governor Mervyn King has had to write such a letter to the chancellor only once before, when inflation hit 3.1% in April 2007. | The Bank governor Mervyn King has had to write such a letter to the chancellor only once before, when inflation hit 3.1% in April 2007. |
| The governor said that the rate of inflation should peak towards the end of this year, as long as there were no "unexpected increases in oil and commodity prices". | |
| Should the UK avoid severe external shocks, then the rate of inflation will begin to fall back towards the 2% target next year, Mr King said. | |
| Economic slowdown | Economic slowdown |
| The higher than expected rise in consumer price inflation has transformed expectations for interest rates, according to the BBC's Economics Editor, Hugh Pym. | The higher than expected rise in consumer price inflation has transformed expectations for interest rates, according to the BBC's Economics Editor, Hugh Pym. |
| The BBC's Declan Curry announces the inflation rise | The BBC's Declan Curry announces the inflation rise |
| Confident talk of two or more cuts in borrowing costs from the present level of 5% has been replaced by forecasts of unchanged or even higher rates in the months ahead, our editor says. | Confident talk of two or more cuts in borrowing costs from the present level of 5% has been replaced by forecasts of unchanged or even higher rates in the months ahead, our editor says. |
| Mr King and his colleagues are unlikely to cut interest rates further until they are convinced that the inflationary threat has passed - despite pleas from those struggling in the housing market. | Mr King and his colleagues are unlikely to cut interest rates further until they are convinced that the inflationary threat has passed - despite pleas from those struggling in the housing market. |
| However, analysts warn that raising interest rates to curb inflation could dampen an economy already dented by slowing growth and the weakening housing market. | However, analysts warn that raising interest rates to curb inflation could dampen an economy already dented by slowing growth and the weakening housing market. |
| "The key factor [deciding the direction of interest rates] will be whether increased inflationary expectations feed through into greater wage demands and second round effects â at the moment average earnings growth is stable, but the MPC will be watching it closely through 2008," said economist Charles Davis from the Centre for Economics and Business Research. | "The key factor [deciding the direction of interest rates] will be whether increased inflationary expectations feed through into greater wage demands and second round effects â at the moment average earnings growth is stable, but the MPC will be watching it closely through 2008," said economist Charles Davis from the Centre for Economics and Business Research. |
| Passed on | Passed on |
| HAVE YOUR SAYLike everyone else, I'm feeling the squeeze everywhereAndrew, NewcastleSend us your comments | HAVE YOUR SAYLike everyone else, I'm feeling the squeeze everywhereAndrew, NewcastleSend us your comments |
| Consumers and companies are already feeling the effects of higher energy and food bills. | Consumers and companies are already feeling the effects of higher energy and food bills. |
| Oil prices have nearly doubled over the past year and on Monday the price hit a fresh high of almost $140 in New York. | Oil prices have nearly doubled over the past year and on Monday the price hit a fresh high of almost $140 in New York. |
| That in turn has pushed up the cost of petrol and diesel, prompting many people to rein in their spending in other areas. | That in turn has pushed up the cost of petrol and diesel, prompting many people to rein in their spending in other areas. |
| At the same time, many food prices have surged to record levels because of increased demand and inclement weather in key producer nations. | At the same time, many food prices have surged to record levels because of increased demand and inclement weather in key producer nations. |