UK inflation reaches highest level in 30 Years

According to the Office for National Statistics, December’s inflation was 5.4%. This is the highest level since 1992. Prices rose the most for transport, food, beverages, furniture and housing.

The prices are rising faster than the pay rate, making it harder for households to make ends meets. In December, wages increased by 3.8% annually.

We are in for more pain. British consumers will see a sharp increase in their costs as a result of an April cap on energy prices and tax hikes. Households will pay £790 ($1,075) more to heat and light their homes this year, according to Bank of America.

Paul Dales (chief UK economist at Capital Economics) stated that it was no secret that inflation would rise further. He anticipates that consumer price inflation will reach 7% in April and remain above 4% throughout the year.

The Bank of England was the first major central bank in the world to raise interest rates since the outbreak of the pandemic. However, the price increase will make it more difficult for policymakers to be aggressive. Dales anticipates that the Bank of England will increase rates to 0.5% in February.

Boris Johnson, Prime Minister of the United Kingdom, has been challenged to do more for households. The main opposition Labour Party, for instance, has proposed a windfall income tax on oil and gas companies from the North Sea to offset rising energy prices.