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UK inflation rises amid continued pressure on the Pound

13 June 2017

UK inflation rose to a four-year high of 2.9 per cent in May 2017, the Office for National Statistics (ONS) announced today.

James Andrews, Head of Investment Management at investment management and stockbroking firm Redmayne-Bentley, said: “UK inflation again surprised on the upside, with core price inflation rising 2.9 per cent year on year versus the 2.7 per cent average estimate by forecasters, led by the increase in the cost of recreational goods and services. Interestingly core inflation, which removes energy and food prices from the measure, also rose ahead of expectations to 2.6 per cent versus the 2.4 per cent forecast.

“This continues to put the squeeze on UK households as pay fails to keep up with these increases. Real wages are, on average, now falling across the UK. A lot of this inflation has been stoked by the fall in the Pound post the ‘Brexit’ vote, and the continued political uncertainty keeps the pressure on the pound as it fell further still post the election result on Friday.

“Unlike some commentators who expect inflation to peak at 3 per cent, I continue to see on-going pressure on the Pound and therefore on-going inflationary pressures on UK households and consumers. The Bank of England’s MPC are unlikely to raise rates anytime soon given the fragility of the economy and the uncertainty that hangs over us at this time, the euro is strengthening on the back of improving fundamentals and political uncertainty unwinding in Europe, and in addition the US are raising rates. There seems little evidence that the Pound can gain the significant upward momentum required to reverse the trajectory of this cost-push inflation and it is therefore hard to see anything other than continued inflationary pressure throughout the rest of 2017 and heading into 2018 within the UK.”

Notes to the Editor

Established in 1875, Redmayne-Bentley is one the UK’s largest independently owned investment management and private client stockbroking firms, with 37 regional offices throughout the UK and in the Republic of Ireland.

Redmayne-Bentley has experienced commentators available for comment on personal finance and stock market issues. 

Author: Ruth Peterson

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