Inflation at four-year high as Brexit bites

Inflation hit its highest level for nearly four years in May, with rising living costs ratcheting up the pressure on household finances in the wake of the Brexit vote.

The Office for National Statistics (ONS) said Consumer Prices Index (CPI) inflation reached 2.9 per cent last month, up from 2.7 per cent in April and the highest level since June 2013.

Economists had been expecting inflation to remain at 2.7 per cent.

The figures lay bare the squeeze on household finances as inflation outstrips wages, with CPI having been sent soaring as the Brexit-hit pound has pushed up the price of imported goods and energy.

May’s CPI surge sees inflation rise further above the Bank of England’s 2 per cent target and will put pressure on policymakers to consider hiking rates beyond 0.25 per cent.

Maike Currie, investment director for personal investing at Fidelity International, said: “Our real income is being squeezed and we’re witnessing this impacting UK consumer spending… This is bad news for an economy which relies on confident consumers spending on goods and services already we are seeing signs of a stagnating economy.”