Inflation in the United Kingdom has risen at the fastest rate in almost 30 years as increased costs for energy, housing and transportation squeezed household budgets.
The consumer price index ticked up to 5.5 per cent in the 12 months through January and was up from 5.4per cent the previous month, the Office for National Statistics said Wednesday. The latest figure is the highest since March 1992, when inflation reached 7.2 per cent.
By comparison, U.S. consumer prices jumped 7.5 per cent last month — the highest rate in 40 years — while they increased to a record 5.1 per cent in the 19 countries that use the euro.
U.K. consumers are reeling from a surge in utility bills fueled by increased demand for energy worldwide as the global economy recovers from the Covid-19 pandemic. Household natural gas prices jumped 28.3 per cent over the past year and electricity prices rose 19.2 per cent. By comparison, U.S. gas prices increased 23.9 per cent and electricity prices rose 10.7 per cent.
The pain is only going to get worse for British consumers. The nation's energy regulator has announced a 54 per cent increase in gas and electricity prices that will hit 15 million households in April, the same month that income taxes are set to rise by 1.5 per cent.
“We understand the pressures people are facing with the cost of living,'' Treasury chief Rishi Sunak said in a statement. “These are global challenges, but we have listened to people's concerns and recently stepped in to provide millions of households with up to 350 pounds to help with rising energy bills.''
The Bank of England said earlier this month that it expects inflation to peak at 7.25 per cent in April. On February 3, the bank increased its key interest rate to 0.5 per cent in an effort to curb inflation.
Capital Economics, which provides economic research to investment banks and money managers, expects the central bank to increase its key rate to 1.25 per cent this year and 2 per cent in 2023.
The new inflation data “will add more pressure on the Bank of England to raise interest rates rapidly,” said Paul Dales, chief U.K. economist for the firm.
