June 24, 2024

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UK inflation hits 30-year high at 5.5%

UK inflation hits 30-year high at 5.5%

Shoppers walk along Oxford Street in London on December 21, 2021.

Tulga Akmen | AFP | Getty Images

LONDON – UK inflation came in at 5.5% annualized in January, slightly above expectations and remaining at a 30-year high.

On a monthly basis, consumer prices contracted 0.1%, slightly less than economists in a Reuters poll had expected. The annual reading was expected to remain at 5.4%.

5.4% annual increase in December In consumer prices is the highest since 1992, and Bank of England imposes successive increases in interest rates for the first time since 2004 in an attempt to contain hyperinflation.

The bank expects inflation to peak at 7.25% in April, having previously projected a 6% ceiling in its December report.

The consumer price index including housing costs for landlords (CPIH) rose 4.9% in the 12 months to January 2022, up from 4.8% in December, the Office for National Statistics reported Wednesday.

The biggest contributors were energy, fuel and food, among other things like used cars.

Hinesh Patel, portfolio manager at Quilter Investors, said the next BoE policy meeting now looks likely to be a “rubber seal” for another rate hike, with the only question being whether the MPC will opt for a 25 basis increase. point or 50 basis points.

“While there are indications that some bottlenecks in the supply chain are receding, and prices of some commodities are receding, the risks of upward inflation remain clear,” Patel said.

He noted that tensions between Russia and Ukraine are keeping gas prices high while energy costs continue to rise, but a mild winter and spring and potential de-escalation in Eastern Europe could cool prices somewhat.

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“We currently have very tight labor markets at the moment with a combination of Brexit, long-term Covid, early workforce exit, none of which are going to be dealt with through monetary policy at the moment,” Patel added.

Families in the UK are feeling the cost of living crunch as energy prices soar. The surge prompted the country’s energy regulator to raise its energy price ceiling by 54% as of April, as supply-side issues continue to put upward pressure on costs.

Colin Dyer, customer manager at Abrdn financial planning.

“the Bank of England Raising interest rates more than once over the next few months can also be justified in defense of these higher rates – which means that more challenges may lie ahead for households.”