Britain's Chancellor of the Exchequer Rishi Sunak hosts a press conference in the Downing Street Briefing Room on February 3, 2022. (Photo by JUSTIN TALLIS / various sources / AFP)
UK annual inflation has hit the highest level since 1992, data showed Wednesday, adding pressure to the cost of living and on the Bank of England to keep raising rates.
The Consumer Prices Index (CPI) edged up to 5.5 percent in January from 5.4 percent in December, also a level not seen in almost three decades, the Office for National Statistics said in a statement.
The rate is now at the highest level since March 1992, the ONS added.
Prices have soared globally over the past year, in large part owing to surging energy prices, while consumers are facing also higher food costs as economies reopen from pandemic lockdowns.
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“We understand the pressures people are facing with the cost of living,” British finance minister Rishi Sunak said in response to Wednesday’s data.
“These are global challenges,” he added.
Annual inflation in the eurozone stands at a record-high 5.1 percent, while CPI in the United States hit 7.5 percent in January – the largest increase in almost 40 years.
As global inflation reaches decades-high peaks, central banks are deciding on how fast to hike interest rates.
The Bank of England earlier this month lifted its main interest rate for the second time in a row aimed at bringing down inflation, which is rising faster than workers’ wage increases.
The BoE has forecast Britain’s annual inflation rate to peak at 7.25 percent in April, far above its 2.0-percent target.
The latest “increase in CPI inflation… will add a bit more pressure on the Bank of England to continue raising interest rates rapidly”, said Paul Dales, chief UK economist at Capital Economics.
Policymakers in December lifted borrowing costs from a record-low 0.1 percent to 0.25 percent – their first tightening in more than three years.
They raised them again this month, to 0.5 percent.
With prices shooting higher, Sunak earlier this month unveiled a support package worth £9 billion ($12.2 billion, 10.7 billion euros) targeted at 28 million poorer and middle-income households.
This is likely to be offset, however, by a surge in domestic energy bills and a salary tax hike from April.
Victoria Scholar, head of investment at Interactive Investor, said “markets should brace for an aggressive (BoE rate) tightening cycle ahead, with the potential for much higher price levels in the face of April’s energy price cap hike”.
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Scholar also pointed to “the possibility of further supply constraints if tensions between Russia and Ukraine flare up again”.
World oil prices this week struck the highest levels since 2014, before cooling, as investors grow increasingly worried about energy supplies in the event of a war between major producer Russia and Ukraine.
As prices soar in the UK, hundreds of people protested in London and other cities Saturday, demanding government action to tackle the sharply rising cost of living.
One of the marches organised by The People’s Assembly headed for Downing Street in London where they called for the resignation of scandal-hit Conservative Prime Minister Boris Johnson.
Similar demonstrations were held in several UK cities, including Glasgow in Scotland where a placard read “Freeze Prices Not the Poor”.
Many demonstrators’ banners mocked Johnson for lockdown-busting Downing Street parties, amid a police probe into whether the festivities were legal that has shaken his premiership.
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