Britain’s inflation rate held steady in May, dashing expectations that price increases would slow, according to data released Wednesday, a day before the country’s central bank is expected to raise rates again. interest.

Consumer prices rose 8.7 percent from a year earlier, the same as in April, the Office for National Statistics said. Economists had predicted that prices would fall slightly. The data is likely to add to concerns that Britain’s cost-of-living crisis will intensify in the coming months as mortgage holders come to grips with the burden of higher interest rates imposed to cope with a stubbornly strong inflation.

The Bank of England is expected to raise interest rates for the 13th consecutive time on Thursday, by a quarter point to 4.75 percent, the highest level since early 2008.

Last week, wage data showed that wages grew faster than expected. On Wednesday, the statistics agency said core inflation, which excludes energy and food prices and is used to gauge how deeply inflation is taking hold in an economy, rose to 7.1 percent for the year through May. , the fastest pace since 1992. Services inflation, a gauge closely watched by politicians, rose to 7.4 percent, from 6.9 percent in April.

“The overwhelming impression is that this is a disappointing set of numbers showing broad-based strength” in prices, Sandra Horsfield, an economist at Investec, wrote in an analyst note. “This is just not good enough.”

Rising core inflation is “something that may cause some concern,” Grant Fitzner, chief economist at the statistics agency, told the BBC.

That’s because it’s been pushed higher by price increases in services, such as restaurants and hotels, largely reflecting higher wage costs for businesses, Fitzner said. “Prices for services are quite rigid,” he said. “It may take longer for them to recover, but also longer for them to relax.”

This raises concerns that headline inflation will be much slower to fall than to rise, he added.

And that is what Britain is experiencing, as inflation data over the past few months has repeatedly defied expectations and remained above expectations.

Britain’s headline inflation rate has slowed from a peak of 11.1 percent in October but remains uncomfortably high, especially compared to international peers. In the United States, the Consumer Price Index rose 4 percent in May from a year earlier, and in the eurozone, inflation averaged 6.1 percent last month for the 20 countries that use the euro. The Federal Reserve has paused its interest rate hikes and traders are betting that the European Central Bank will raise rates just one or two more times; in Britain, however, investors predict the central bank will be forced to raise rates longer to stamp out inflation.

“Now we are in a situation where the markets say they have lost faith, and that requires a big reaction from the bank,” said Andrew Goodwin, an economist at Oxford Economics. The central bank “needs to recognize that the game has changed,” he said, adding that he would not be surprised if the central bank raised rates by half a point on Thursday.

Andrew Bailey, Governor of the Bank of England, said last week that policymakers still expected the inflation rate to come down, but “it’s taking much longer than expected.”

Bailey’s predecessor, Mark Carney, recently said that Britain’s exit from the European Union was part of the reason Britain suffered from stubbornly high inflation. There were other economic shocks at the same time, such as rising energy prices after Russia’s invasion of Ukraine, but Brexit is a “one-time” part of the adjustment that will take years to work out, he said.

“We put forward before Brexit that this will be a negative supply shock for a period of time, and the consequence will be a weaker pound, higher inflation and weaker growth,” he said. told The Daily Telegraph last week.

Traders are betting that the Bank of England interest rate could hit 6 percent early next year. These expectations are shown through rising government bond yields, which are now above the levels reached during Liz Truss’s brief but turbulent tenure as prime minister last fall.

In response, mortgage rates are also rising. Last weekend, the average rate on a two-year fixed-rate mortgage hit 6 percent for the first time this year.

Last month, the central bank warned that many mortgage holders had yet to experience the cost of higher interest rates. About 1.3 million households are expected to reach the end of their fixed-rate term by the end of the year, which will trigger a reset in the rate that applies to your loan. And the average mortgage holder in that group will see their monthly interest payments increase by around £200 ($255) per month, or £2,400 over the course of a year, if their mortgage rate increases by three percentage points, which is what mortgage quotes suggested last time. month, the bank said.

Additional financial strain follows months of higher prices, from energy bills to groceries. Food and non-alcoholic beverage prices rose 18.3 percent in May from a year earlier, data showed Wednesday, a slight slowdown from previous months when food inflation peaked at 45 years. The moderation in food and fuel prices was offset by higher prices in restaurants and hotels and in second-hand cars and live music events.

“We know how much high inflation hurts families and businesses across the country,” Jeremy Hunt, the finance minister, said in a statement on Wednesday. He added that the government’s plan to halve the inflation rate would be the best way to keep costs and interest rates down.

“We will not waver in our determination to support the Bank of England in its bid to drive inflation out of our economy,” he said.

In January, the government, led by Prime Minister Rishi Sunak, promised to halve inflation by the end of the year, which would mean a rate of around 5 percent, amid waves of strikes in the public and private sectors. of workers frustrated by falling living standards.

When that promise was made, it seemed almost guaranteed to succeed based on economic forecasts. But as the months have passed, inflation has been harder to curb than expected, and now it risks falling short of that promise.

Adding to the government challenges, separate data released Wednesday estimated that British public sector debt it surpassed 100 percent of gross domestic product for the first time since 1961, as the government paid more money for energy support programs and social benefits to mitigate the cost-of-living crisis.

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