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UK consumer price inflation soars to 30-year high

posted onMarch 23, 2022

UK's inflation accelerated to 6.2% in February from 5.5% in January and above market forecasts of 5.9%, the Office for National Statistics said on Wednesday (March 23). It is the highest inflation rate since March of 1992, as soaring food, fuel and energy costs continue to deepen the country’s cost of living crisis. 

Biggest price increases came from transport (11.5% vs 11.3% in January); furniture and household equipment (9.1% vs 8.4%); clothing and footwear (8.9% vs 6.3%); housing and utilities (7.2% vs 7.1%) namely electricity, gas and other fuels, and owner occupiers’ housing costs; and food (5.1% vs 4.3%). 

Britain now has the second-highest annual inflation rate among Group of Seven countries, behind only the United States 

On a monthly basis, consumer prices jumped 0.8%, in contrast to the 0.1% fall in January and exceeded expectations for a 0.6% rise.

"Rising inflation remains a significant concern for the economy, squeezing household incomes and increasing cost pressures on retailers," Helen Dickinson, chief executive of the British Retail Consortium told BBC.

The Bank of England said last week it expected inflation to reach around 8% this spring with the risk of a double-digit increase in the autumn.
But fallout from the war in Ukraine and rising energy prices could push inflation to a 40-year high of 8.7% in the final three months of 2022, the Office for Budget Responsibility said. 

The Bank of England also expects inflation to fall back and be around its 2% target in two or three years’ time. 

Policymakers raised the key Bank Rate by 25bps to 0.75% during the March meeting, in line with expectations. It was the third consecutive rise in borrowing costs, taking interest rates back to pre-Covid levels.

The British central bank's decision came a day after the United States Federal Reserve raised its benchmark short-term rate to 0.25% to tame the worst inflation since the early 1980s. 

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