Shoppers walk along Oxford Street in London on December 21, 2021.
Tolga Akmen | AFP | Getty Images
LONDON – Inflation in the UK came in at 5.5% in January, slightly ahead of forecasts and remaining at its highest level in 30 years.
On a monthly basis, consumer prices contracted 0.1%, slightly less than economists expected in a Reuters poll. The annual print was expected to remain at 5.4%.
The 5.4% annual rise in consumer prices in December was the highest since 1992, and the Bank of England imposed back-to-back interest rate hikes for the first time since 2004 in a bid to contain galloping inflation.
The Bank expects inflation to peak at 7.25% in April, after previously forecasting a ceiling of 6% in its December report.
The consumer price index, including homeowners’ housing costs (CPIH), rose 4.9% in the 12 months to January 2022, from 4.8% in December , the Office for National Statistics announced on Wednesday.
The main contributors were energy, fuel and food, among other items such as used cars.
Hinesh Patel, portfolio manager at Quilter Investors, said the upcoming Bank of England policy meeting now appears to be a “rubber stamp” for another interest rate hike, with the only question being whether the Monetary Policy Committee opts for a 25 basis point hike. points or 50 basis points.
“While there are signs that some of the supply chain bottlenecks are easing and prices for some goods are moderating, the risks of upside inflation remain clear,” Patel said. .
He noted that tensions between Russia and Ukraine are keeping gas prices high as energy costs continue to soar, but a mild winter and spring and possible de-escalation in Europe from the East could moderate prices somewhat.
“We currently have extremely tight labor markets at the moment due to a combination of Brexit, long Covid and early labor departures, none of which will be addressed by monetary policy here and now” , added Patel.
Households in the UK are feeling the effects of the cost of living crisis as energy prices rise. The spike prompted the country’s energy regulator to raise its energy price cap by 54% from April as supply issues continue to put upward pressure on costs .
“Households should prepare for further acceleration in the cost of living through at least the second half of 2022, particularly when higher energy prices are implemented in April,” said Colin Dyer, director of customers at Abrn Financial Planning.
“The Bank of England may also be justified in raising interest rates more than once over the next few months to defend this price spike, which means further challenges could still arise for households. “
