The apex bank of the United Kingdom–Bank of England (BoE) is under increased pressure to lift interest rates as the UK’s Consumer Prices Index (CPI) in December 2021 reached its highest since early 1992.
Official statistics released on Wednesday revealed that the country’s CPI jumped 5.4 per cent in the 12 months to December 2021, reports Xinhua news agency.
Monthly CPI inflation stood at 0.5% in December, lower than 0.7% in November.
Core CPI, excluding energy, food and other volatile items, leapt 4.2%, also the highest reading in 30 years.
The increased prices of food and non-alcoholic beverages, restaurants and hotels, furniture and household goods, and clothing and footwear is seen as the reason behind inflation, the country’s Office for National Statistics (ONS) said in a report.
“Food prices again grew strongly, while increases in furniture and clothing also pushed up annual inflation,” said Grant Fitzner, chief economist at the ONS.
“These large rises were slightly offset by petrol prices, which despite being at record levels were stable this month but rose this time last year.”
The UK government ordered tight restrictions to curb the spread of the highly contagious Omicron coronavirus variant.
Nonetheless, “the closures in the economy last year have impacted some items but, overall, this effect on the headline rate of inflation is negligible”, Fitzner said.
In December 2021, the BoE increased the interest rates for the first time in the last three years after slashing it to a record low during the Covid-19 pandemic.
The decision came on the heels of rising annual CPI inflation in the country; it rose to a high of 5.1% in November from 3.1 per cent in September.
Increasing energy prices, supply chain disruptions and labour shortages augmented the increased rates of consumer products.
Economists raised flags that inflation is likely to climb in the coming months as the full impact of an increased energy price is yet to be realized by customers. Gas and electricity bills for millions of households will jump more than half in April when a semi-annual adjustment in the energy price cap takes effect.
“Price gains are fairly broad-based, which means that it is less likely that inflationary pressures will clear out once energy costs start to moderate — placing increased pressure on the BOE’s hiking cycle,” said Ima Sammani, an analyst at Monex Europe.