Inflation and interest rates to put spending in spotlight

Inflation is expected to remain high
Inflation is expected to remain high

The squeeze on household finances will be in sharp focus next week as the latest inflation figures are released and rate-setters gather in the wake of the shock General Election result.

Economists are forecasting Tuesday’s figures to show inflation remaining at a near four-year high as it outstrips wage growth following the pound’s plunge since the Brexit vote.

Inflation and the economy will stay in sharp focus on Thursday when the Bank of England is expected to keep interest rates on hold at 0.25%.

The minutes of the rates meeting will be watched closely for the Bank’s latest thinking on prospects for inflation and the pound following the election.

Investec economists believe consumer prices index (CPI) inflation will stay at 2.7% in May as a fall in petrol prices offsets surging energy and food costs, which have been pushed higher by weak sterling.

Philip Shaw at Investec said: “This month, we see a number of competing factors influencing the targeted measure.

“Utility price hikes, notably electricity, plus ongoing food price acceleration are likely to put upward pressure on inflation. By contrast we note that petrol prices slipped back by around 2%.”