15th January 2022
Official statistics released last month showed the UK headline rate of inflation now stands at its highest level since March 1992, with survey data pointing to further cost pressures in the pipeline.
The latest ONS figures show that the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – rose to 5.4% in December.
This was 0.2% ahead of market expectations and a sizeable jump compared to the previous month’s rate of 5.1%.
Rising prices across the food, hospitality, household goods and clothing sectors were all key drivers of the increase, while fuel prices also remained at recent high levels. With gas and electricity
bills set for a further sharp hike in April, some economists are now predicting that the CPI rate is likely to hit 7% by the spring.
Two recently-released surveys also point to further inflationary pressures as firms continue to grapple with rapidly rising cost burdens. January’s IHS Markit/CIPS PMI report stated that
cost pressures remain ‘elevated at near-record levels,’ while the Confederation of British Industry’s Industrial Trends Survey for the quarter to January showed ‘intense and escalating cost and price pressures’ with manufacturers reporting average costs growing at the quickest rate since 1980.
January’s data has intensified pressure on Bank of England (BoE) policymakers to raise interest rates again in a bid to dampen consumer demand and bring inflation back down towards the
Bank’s 2% target. In December, the BoE became the first major central bank to raise rates since the onset of the pandemic when it announced a 15-basis-point increase taking Bank Rate to 0.25%.