Inflation: Why interest rates will rise further

Inflation in food and non alcoholic drinks is now 13.1%, with milk, cheese and eggs driving the surging prices.

Very worrying. Overall inflation fell fractionally to a still-high 9.9%, thanks to an easing of petrol prices.

With the labour market tight, as shown by yesterday’s employment stats - whose most troubling aspect was the continued shrinkage in numbers available to work - and the government next week set to give details of its energy-price-cap and tax-cut stimuli, it is inevitable that the Bank of England will, in eight days, increase interest rates again, presumably by another 0.5% or even possibly 0.75% - although the economy is weak and did not grow in latest three months on available stats.

With expectations rising of further sharp rises in US interest rates, sterling remains under intense downward pressure, and the risk is growing that the UK will import more inflation via the falling and weak pound, unless and until the Bank of England follows the lead of the US Fed with hefty increases in interest rates.

These are pretty much the worst and most challenging conditions any new PM and Chancellor would want to inherit.

They have literally no time to take stock, but history will judge them on the decisions they take now.

And as a footnote, even their great supporter John Redwood thinks it’s nuts that from the end of next week Parliament is not scheduled to sit until mid October, in what is a national emergency.