Inflation hits nearly 30-year high of 5.5% as price of pasta and tinned tomatoes soar
Consumer prices in the UK rose at the fastest annual pace in nearly 30 years last month, intensifying the squeeze on households and reinforcing the chances that the Bank of England will raise interest rates for a third meeting in a row.
This was above expectations from economists in a Reuters poll for it to hold at December’s 5.4%.
Earlier this month the Bank of England revised up its inflation forecasts to predict inflation will peak at around 7.25% in April, when a 54% rise in regulated household energy bills take effect, squeezing households hard.
The Bank of England has already raised interest rates twice since December – lifting rates to 0.5% from 0.1% – and financial markets expect a further rate rise to 0.75% or 1% on March 17 after the bank’s next meeting.
The Bank of England does not expect inflation to return to its 2% target until early in 2024, although most economists think inflation will fall faster.
Higher energy prices have been the biggest single factor lifting British inflation so far, although global pandemic-related supply-chain problems have raised the price of many other goods too.
“Clothing and footwear pushed inflation up this month and although there were still the traditional price drops, it was the smallest January fall since 1990, with fewer sales than last year,” ONS chief economist Grant Fitzner said.
Britain is not alone in seeing a surge in the cost of living.
US consumer price inflation hit a 40-year high of 7.5% in January, while inflation in the euro zone was 5.1%, the highest since the European single currency’s creation.
Core inflation, which excludes sometimes volatile prices for energy, food, alcohol and tobacco, rose to 4.4% in January from 4.2% in December, its highest since these records began in 1997.
Retail price inflation – a longer-running series which the ONS says is no longer accurate, but which is used in commercial contracts and to set interest payments for some government bonds – was the highest since March 1991 in January at 7.8%.
The latest data showed further inflation pressure ahead as manufacturers increased their prices by 9.9% from January last year, the biggest annual jump since September 2008.
Excluding volatile products such as food, tobacco and petroleum products, the 9.3% increase was the biggest since annual comparisons began in 1997.
But the prices of factory inputs rose slightly less quickly, showing an increase of 13.6%, down from 13.8% in December and a peak of more than 15% in November.
Meanwhile, the price of pasta, tinned tomatoes and strawberry jam jumped last year as the cost of supermarket staples rose, new figures suggest.
Changes in the average cost of the food items at Asda, Morrisons, Sainsbury’s and Tesco were tracked by retail research firm Assosia for BBC News, which found that overall the price of a basket filled with 15 standard food items rose by £1.32, or 8%, in just one year.
Some items fell in price, with carrots and mild cheddar seeing small declines.
The same basket of food made up of items from the cheaper “value” ranges at the supermarkets recorded an overall fall in price, down 45p, or 4%. But within that, items such as pasta and vanilla ice cream saw rises of more than 6%.
