Inflation Rate In United Kingdom Hits 30-Year High

The inflation rate in the United Kingdom reached a 30-year high in December as higher energy prices and supply chain constraints drove up consumer prices.

Inflation hit an annual rate of 5.4%, its highest level since March 1992 and up from 5.1% in November. Economists polled by the Reuters News Agency had expected an increase of 5.2% in December from a year earlier.

On a monthly basis, consumer prices rose 0.5%, outstripping economist projections for a 0.3% increase.

The surging cost of living is raising expectations that the Bank of England will look to again raise interest rates. In December, England’s central bank became one of the first to lift borrowing costs from their pandemic-era lows in an effort to cool off inflation.

Markets will be closely watching the Monetary Policy Committee’s next meeting on February 3, with policymakers considering another rate increase following the 15-basis-point hike to 0.25% in December.

The Bank of England is also operating against the backdrop of a remarkably tight labor market, with vacancies tracking at a record high and employment remaining below pre-pandemic levels.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH), rose by 4.8% in the 12 months to December, up from 4.6% in November and the highest level since September 2008. The largest contributions came from housing and transport.