Inflation rises to 30-year high of 5.5 percent amid cost of living crisis

Inflation in the UK increased to the highest rate for three decades in January as the impact of rising energy bills fed into a wide range of goods and services, adding to the squeeze on household living standards.

According to Office for National Statistics (ONS), Consumer Prices Index (CPI) rose by 5.5 per cent in the 12 months to January 2022, up from 5.4 percent to December 2021. This is the highest CPI 12-month inflation rate in the National Statistic series, which began in January 1997, and it was last higher in the historical modelled series in March 1992, when it stood at 7.1 percent.

“We understand the pressures people are facing with the cost of living,” Chancellor Rishi Sunak said in response to Wednesday’s data.

“These are global challenges,” he added.

Despite the increase in the annual inflation rate, the ONS said prices for goods and services fell by a modest 0.1 percent in January after restaurant and hotel prices – which played a large part in the inflationary surge before Christmas – fell back.

The rising costs of some household goods also pushed up inflation, although were offset partially by cheaper petrol and diesel prices in January after record highs at the end of 2021.

As inflation reaches the highest levels in decades, lagging rises to workers’ wages, central banks are deciding on how fast to raise 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.

The BoE has forecast Britain’s annual inflation rate to peak at 7.25 percent in April.

Economists, however, expect inflation to fall in the second half of the year after reaching a peak in April, when the energy regulator Ofgem will raise the cap on energy bills.

The rise in the cap will add more than £600 to annual bills adding to the cost of living squeeze. However, it could be increased again in October unless the cost of gas and petrol on international markets drops as expected in the summer.