BRITAIN INFLATION RATE JUMPS TO 30-YEAR HIGH

Wed 19 January 2022:

Consumer prices rose in December as a result of higher energy costs, growing demand, and supply chain issues, sending the UK inflation rate to a 30-year high.

On an annual basis, inflation jumped to 5.4 percent, the highest since March 1992, and up from 5.1 percent in November, which was also a decade high.

Economists polled by Reuters had expected an increase of 5.2%.

On a monthly basis, consumer prices rose 0.5 percent, beating economists’ projections of a 0.3 percent rise.

The rise in living costs has prompted anticipation that the Bank of England may hike interest rates once more.

In December, the Bank of England became the first major central bank to start hiking borrowing costs from post-pandemic lows.

Markets will be following the Monetary Policy Committee’s next meeting on Feb. 3 after the 15-basis-point hike to 0.25 percent in December. Another rate hike is likely to be considered by policymakers.

The bank is also operating in an unusually tight labor market, with vacancies at an all-time high and employment levels remaining well below pre-pandemic levels.

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

SOURCE: INDEPENDENT PRESS AND NEWS AGENCIES

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