Roundup: UK households struggling with high inflation despite interest rate hikes

By Xinhua writer Sun Xiaoling

LONDON, June 26 (Xinhua)

UK households continue to suffer from high inflation although the Bank of England (BoE) has raised its benchmark interest rate to a record high in an effort to tame the country's soaring cost of living.

The price of car insurance in the UK has spiked by over 43 percent in the last 12 months, according to the latest figures from the Office for National Statistics (ONS).

Meanwhile, the average two-year fixed residential mortgage rate skyrocketed to 6.23 percent on Monday, according to data released by UK-headquartered financial data provider Moneyfacts.

This is the highest rate since last November. ONS figures also show that the Consumer Price Index (CPI) across the country increased by 8.7 percent in the 12 months up to May.

"After last month's fall, annual inflation was little changed in May and remains at a historically high level," ONS Chief Economist Grant Fitzner said.

"Sticky inflation is extending the cost-of-living crisis for everyone in Britain, and hardening the mortgage crunch for the 7 million households who have a mortgage," said James Smith, research director at the Resolution Foundation.

To tame the high inflation, the BoE increased its benchmark interest rate by 0.5 percentage points to 5 percent last week, marking the 13th consecutive rate hike since December 2021.

"Until inflation begins (descending) to more palatable levels, the Bank of England will continue to put the brakes on the economy," said Richard Carter, head of fixed interest research at investment service provider Quilter Cheviot.

In order to tackle stubbornly high inflation, Prime Minister Rishi Sunak is prepared to block the pay rises for public sector employees, saying there is no alternative to clamping down on rising prices, the Telegraph newspaper reported.

The Telegraph added that John Glen, the chief secretary to the Treasury, had indicated earlier that ministers could overrule the independent review bodies' recommendations on public sector pay, as it would be "irresponsible" not to take into account the effect of prospective salary hikes on inflation.

However, the Trades Union Congress (TUC) has accused the government of "blaming workers who can't afford to put food on the table."

"UK inflation is not being driven by public servants. Their household budgets are under such pressure that we've got nurses and teachers using food banks," said TUC General Secretary Paul Nowak.

"Playing politics with working people's incomes is not only deeply cynical, but it puts all of our futures at stake," added Nowak.

Groups including junior doctors and teachers have announced further strike actions for next month, amid an ongoing dispute over pay and working conditions.