More interest rate hikes expected as Britain’s inflation hits near 30-yr high

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Official statistics have revealed that Britain’s inflation reached a new high of 5.5 per cent in January, breaking its previous near 30-year record in December 2021, underpinning the outlook for more hikes in interest rates.

Clothing and footwear pushed inflation up, Xinhua news agency quoted Grant Fitzner, chief economist at the country’s Office for National Statistics (ONS), as saying on Wednesday.

He added that the rising costs of some household goods and increases in rents also contributed to the surge.

As goods prices were again the main reason behind the acceleration, the price rises continue to reflect the global imbalance between supply and demand, said Tom Pugh, an economist at RSM UK, a business advisory firm.

The hikes have impacted people’s daily life to the bone. Between December 2021 and January 2022, for example, the price of pasta alone increased by 11.4 percentage points, while the cost of coffee rose six percentage points, according to Jamie O’Halloran, an economist at Pro Bono Economics, a charity.

Britain’s inflation rose by 5.4 per cent in December 2021. The recent increases stayed far above the 2 per cent target of the Bank of England (BoE).

They have prompted the BoE to increase the interest rates twice in December and February, the first back-to-back hikes since 2004.

However, experts did not foresee a quick end to the spikes. Britain’s energy regulator, the Office of Gas and Electricity Markets (Ofgem), announced earlier this month that from April, the energy price cap will increase by 50 per cent, meaning another blow to around 22 million households already pressured by rising bills.

According to the ONS report, on a monthly basis, Britain’s Consumer Prices Index fell by 0.1 per cent in January. Some considered it as an early sign for the country’s inflation to peak sooner.

The February figure will be crucial to see if this carries on or the surge picks up again due to continuing supply chain and labour shortage issues, the report added.

A comparison of independent forecasts on the British economy published on Wednesday by the economic and finance ministry showed an average forecast of 4.4 per cent for the growth of the country’s gross domestic product in 2022.

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