UK inflation hits nearly 30-year high of 5.5%

LONDON: British consumer prices rose at the fastest annual pace in nearly 30 years last month as inflation hit 5.5%, up from December’s 5.4%, the Office for National Statistics said on Wednesday.

Economists polled by Reuters had forecast inflation would stay unchanged at December’s rate but it edged up to its highest since March 1992.

Earlier this month the Bank of England revised up its inflation forecasts to predict inflation will peak at around 7.25% in April, when a 54% rise in regulated household energy bills take effect, squeezing households hard.

The British central bank does not expect inflation to return to its 2% target until early in 2024, although most economists think inflation will fall faster.

The BoE has already raised interest rates twice since December – lifting rates to 0.5% from 0.1% – and financial markets expect a further rate rise to 0.75% or 1% on March 17 after the BoE’s next meeting.

Higher energy prices have been the biggest single factor pushing up British inflation so far, although global pandemic-related supply-chain problems have raised the price of many other goods too.

“Clothing and footwear pushed inflation up this month and although there were still the traditional price drops, it was the smallest January fall since 1990, with fewer sales than last year,” ONS chief economist Grant Fitzner said.