Expert comment: UK inflation rises to 3.1%

“The latest inflation figures are another reminder that the cost-of-living crisis has not simply disappeared. While inflation came down significantly from the levels experienced a few years ago, households are once again facing rising prices at a time when many have only just begun to feel some relief.

“The renewed pressure from energy prices is particularly concerning. Higher oil and gas prices rarely stay confined to household energy bills or the petrol pump. They feed through into transport, production and supply-chain costs and, eventually, into the prices consumers pay for food, goods and services. This creates the risk of households being squeezed from several directions at once.

“There are some more encouraging signs beneath the headline figure. Wage growth has been slowing, and the labour market has weakened, which should reduce some domestic inflationary pressure. However, this creates its own problem: if prices begin accelerating again while wage growth slows, households can see their real purchasing power squeezed once more. The concern now is how persistent this latest increase becomes. A temporary rise caused predominantly by global energy markets is very different from inflation becoming embedded throughout the domestic economy. The Bank of England cannot control the price of oil, but it will be watching closely for evidence that higher energy costs are feeding into wider prices and wages.

“For households, the frustrating reality is that lower inflation never meant prices were falling; it simply meant they were increasing more slowly. A renewed acceleration therefore risks further weakening consumer confidence and spending. We are not back at the inflation rates experienced during the height of the previous cost-of-living crisis, but there are enough warning signs here that neither policymakers nor households can afford to become complacent.”