UK sits as outlier on inflation as Sunak admits it is 'more persistent' than expected

investmentweek.co.uk:

Prime Minister Rishi Sunak

The UK was the sole country within the G7 where inflation grew last month, according to a new report from the Organisation for Economic Co-operation and Development.

The OECD said yesterday (4 July) that UK inflation grew from 7.8% in April to 7.9% in May, compared to an average reduction from 5.4% to 4.6% across the G7.

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«Inflation declined in all G7 countries, apart from the United Kingdom, where inflation edged up, as core inflation continued to rise ,» the OECD explained.

Among the wider 38-country OECD membership, only the UK, Norway and the Netherlands saw a growth in their inflation figures throughout May.

Norway's inflation rate rose from 6.4% to 6.7%, while the Netherlands saw its inflation rise from 5.2% to 6.1%.

Speaking to the House of Commons liaison committee yesterday, Sunak admitted inflation was proving «more persistent than people anticipated».

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Sunak set a pledge at the start of 2023 to halve inflation, bringing it to 5%. When asked what probability he would place on achieving the pledge, he said he would «keep throwing everything at» the problem.

He added: «Leave that to the forecasters, but we remain committed to bringing inflation down and halfway is a step on it going back down to the inflation target, which is obviously even lower than that.»

Sunak explained that part of the reason inflation was falling slower than expected was large number of people on fixed-rate mortgages, which reduced the effects that rising interest rates had on the economy.

«You are right about the transmission mechanism being perhaps slower when it comes to mortgages