The cost of living in the United Kingdom rose more than expected in December, driven by the surging price of everything from food, drink, furniture, and household goods to restaurants and hotels, official data showed on Wednesday.
Britain’s consumer price index (CPI) rose to 5.4 percent in the final month of the year, its highest in almost 30 years, according to data from the Office for National Statistics. On a monthly basis, UK consumer inflation increased by 0.5 percent in December 2021, compared with a rise of 0.3 percent in the same month in 2020.
Economists polled by Reuters had forecast that the annual CPI rate would edge up to 5.2 percent in December from 5.1 percent in November.
The latest data puts further pressure on policymakers at the Bank of England (BoE) to push up interest rates next month in an effort to tackle surging prices across the nation.
BoE last month became the world’s first major central bank to raise interest rates since the start of the COVID-19 pandemic, voting by an 8–1 majority to raise rates by 0.15 percentage points to 0.25 percent, the central bank said in a Dec. 16 statement.
The decision came a day after consumer price inflation for November hit a decade high at a pace of 5.1 percent, with BoE economists expecting that to climb even higher.
“Bank staff expect inflation to remain around 5 [percent] through the majority of the winter period, and to peak at around 6 [percent] in April 2022, with that further increase accounted for predominantly by the lagged impact on utility bills of developments in wholesale gas prices,” the BoE said in a statement at the time. Officials said that they expect inflation to ease in the second half of 2022.
Meanwhile, Tuesday’s data showed that Britain’s inflation increased by 0.5 percent in December, down from 0.7 percent in November and 1.1 percent in October.
“Inflation rates are currently influenced by the effects of the coronavirus (COVID-19) lockdowns in 2020,” ONS noted.
Commenting on the inflation statistics for December 2021, the British Chamber of Commerce (BCC) said: “The latest figures confirm that inflation ended 2021 on a significant upward trend. December’s increase largely reflected rising food prices and higher clothing and furniture costs, which were slightly offset by a downward contribution from petrol prices.”
“Higher inflation is adding to the unprecedented surge in costs facing businesses,” the BCC said. “The cumulative effect of soaring energy bills, increasing input costs and a looming National Insurance hike means that firms are under mounting pressure to continue raising prices.”
Officials also warned that inflation will continue to soar in the coming months, predicting that it will push well past the 6 percent BoE estimate, driven by the rising price of energy and raw materials along with the reversal of the VAT reductions for hospitality.
“Surging inflation means that a February interest rate rise may be inevitable,” the BCC said while urging that an aggressive hike in rates could have a negative result.
“It is crucial that the government’s Supply Chain Advisory Group and Industry Taskforce provides real-world solutions to the supply and labor shortages that continue to drive the upward pressure on consumer prices. More must also be done to ensure there are no additional costs placed on business for the remainder of this Parliament,” the BCC said.
The latest figures come as Britons are expected to face higher energy bills in April when a cap on energy prices will be raised and taxes are hiked.
Joe Malinowski, founder of TheEnergyShop.com warned that some families could soon be paying upwards of £500 ($680) more annually, though this could be even higher.
Malinowski told Mail Online: “As things currently stand, we are headed for another increase of at least £500. If things don’t settle down soon, increases of £600, £700, or even £800 cannot be ruled out.”