• Thursday, December 08, 2022

Business

UK annual inflation hits fresh 30-year high

Chancellor of the exchequer, Rishi Sunak, says inflation pressures are global challenges (Photo: Justin Tallis/Pool via REUTERS)

By: Chandrashekar Bhat

BRITAIN’S annual inflation has hit the highest level since 1992, data showed on Wednesday (16), adding pressure to the cost of living and on the Bank of England to keep raising rates.

The Consumer Prices Index (CPI) edged up to 5.5 per cent in January from 5.4 per cent in December, also a level not seen in almost three decades, the Office for National Statistics said in a statement.

The rate is now at the highest level since March 1992, the ONS added.

Prices have soared globally over the past year, in large part owing to surging energy prices, while consumers are also facing higher food costs as economies reopen from pandemic lockdowns.

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

“These are global challenges,” he added.

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

Cost of living protests

The BoE has forecast Britain’s annual inflation rate to peak at 7.25 per cent in April, far above its 2.0-per cent target.

The latest “increase in CPI inflation… will add a bit more pressure on the Bank of England to continue raising interest rates rapidly”, said Paul Dales, chief UK economist at Capital Economics.

Policymakers in December lifted borrowing costs from a record-low 0.1 per cent to 0.25 per cent – their first tightening in more than three years.

They raised again this month to 0.5 per cent.

With prices shooting higher, Sunak earlier this month unveiled a support package worth £9 billion targeted at 28 million poorer and middle-income households.

This is likely to be offset, however, by a surge in domestic energy bills and a salary tax hike from April.

Hundreds of people protested in London and other UK cities on Saturday (12), demanding government action to tackle the sharply rising cost of living.

One of the marches organised by The People’s Assembly headed for Downing Street in London where they called for the resignation of scandal-hit Conservative prime minister Boris Johnson.

Similar demonstrations were held in several other UK cities, including Glasgow in Scotland where a placard read “Freeze Prices Not the Poor”.

Many demonstrators’ banners mocked Johnson for lockdown-busting Downing Street parties, amid a police probe into whether the festivities were legal that has shaken his premiership.

(AFP)

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