Inflation jumps to highest level in 30 years

Inflation in Britain touched a near 30-year high in December, intensifying a squeeze on living standards and putting pressure on the Bank of England to raise interest rates again.

As per Office for National Statistics (ONS), the annual rate of consumer price inflation increased to 5.4 per cent from November’s 5.1 per cent, the highest since March 1992.

The figures showed that core CPI – which excludes more volatile food, energy, alcohol and tobacco prices – rose to a record 4.2 per cent from November’s 3.9 per cent.

ONS Chief Economist Grant Fitzner said, “the inflation rate rose again at the end of the year and has not been higher for almost 30 years.

“Food prices again grew strongly, while increases in furniture and clothing also pushed up annual inflation. These large rises were slightly offset by petrol prices, which despite being at record levels were stable this month, but rose this time last year.”

British inflation is widely expected to peak in April when regulated household energy bills look set to increase by around 50 per cent. Last month the BoE forecast a peak of around 6 per cent, but now some economists see 7 per cent as more likely.

Rising inflation is also turning into a political problem for Prime Minister Boris Johnson’s government, which faces calls from the opposition and charities to offset the rise in energy bills, which comes at the same time as a tax increase on wages to fund higher health and social care spending.

“I understand the pressures people are facing with the cost of living, and we will continue to listen to people’s concerns,” finance minister Rishi Sunak said after the inflation data.

Alpesh Paleja, CBI Lead Economist, said, “We’ve not seen the end of rising inflation yet. We expect it to peak in the months ahead, not least if, as expected, the energy price cap is raised.

“With prices on the rise and real wages already falling, it’s likely households will face a cost-of-living crunch for much of this year.

“And with price pressures further up the supply chain still strong, the cost of doing business will also continue to climb sharply.”

Paleja called on the government to come up with urgent solutions to protect the most vulnerable consumers as well as firms that are struggling with ever-growing cost burdens, especially energy-intensive businesses.