Inflation surges to 2.1% rising ABOVE the Bank of England’s target for first time in two years amid fears economy’s Covid bounceback could overheat and force interest rate hikes

• Inflation has surged to 2.1 per cent above the Bank of England’s 2 per cent target
• The increase was above the expectations of analysts amid Covid bounceback
• Fears that the economy is overheating and interest rate hikes will be needed 

Alarm bells were sounded over inflation today as the headline rate surged above the Bank of England’s target.

The CPI index hit 2.1 per cent in May, up from 1.5 per cent the previous month and above the official 2 per cent goal.

The jump was significantly above the expectations of analysts, who had forecast a 1.8 per cent level.

It comes amid increasing concern that the UK economy – along with the US – is overheating as it bounces back strongly from the pandemic. 

The Bank of England has insisted that the inflationary pressure will be temporary.  

But a former top civil servant at the Treasury warned that the Bank was risking having to raise interest rates ‘mush higher’ in future by refusing to act now to stop the economy overheating.  

The CPI index hit 2.1 per cent in May, up from 1.5 per cent the previous month and above the official 2 per cent goal

‘Monetary policy is excessively loose. By rejecting the ‘stitch in time’ policy of Eddie George and Mervyn King, the Bank risks having to raise interest rates much higher later,’ Lord Macpherson tweeted. 

The inflation spike was partly down to higher fuel prices and more expensive clothing.

ONS chief economist Grant Fitzner said: ‘The rate of inflation rose again in May and is now above 2 per cent for the first time since the summer of 2019.

‘This month’s rise was led by fuel prices, which fell this time last year but have jumped this year, thanks to rising crude prices.

‘Clothing prices also added upward pressure as the amount of discounting fell in May.’

The inflation spike was partly down to higher fuel prices and more expensive clothing

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