Annual inflation in the UK has reached its highest level since 1992, data showed on Wednesday, mounting pressure on the cost of living and the Bank of England to continue raising interest rates.
The consumer price index (CPI) rose to 5.5 percent in January from 5.4 percent in December, also a level not seen in nearly three decades, the Office for National Statistics said in a statement.
The percentage is now at its highest level since March 1992, the ONS added.
Prices have soared globally in the past year, largely due to rising energy prices, while consumers are also facing higher food costs as economies reopen after pandemic lockdowns.
“We understand the pressure people are facing with the cost of living,” UK Chancellor of the Exchequer Rishi Sunak said in response to Wednesday’s data.
“These are global challenges,” he added.
Annual inflation in the eurozone is at a record high of 5.1 percent, while the CPI in the United States hit 7.5 percent in January – the largest increase in nearly 40 years.
With global inflation peaking for decades, central banks are deciding how quickly to raise interest rates.
Earlier this month, the Bank of England raised its key interest rate for the second time in a row to curb inflation, which is rising faster than workers’ wage increases.
The BoE has forecast that Britain’s annual inflation rate will peak at 7.25 percent in April, well above its 2.0 percent target.
The latest “rise in CPI inflation… will put a little more pressure on the Bank of England to keep raising rates quickly,” said Paul Dales, the UK’s chief economist at Capital Economics.
Policymakers raised borrowing costs from an all-time low of 0.1 percent to 0.25 percent in December — their first tightening in more than three years.
They have increased it again this month to 0.5 percent.
With prices skyrocketing, Sunak unveiled a £9 billion ($12.2 billion, €10.7 billion) bailout package earlier this month targeting 28 million poorer and middle-income households.
However, this is likely to be offset by a rise in domestic energy bills and an increase in payroll taxes from April.
Victoria Scholar, head of investment at Interactive Investor, said that “markets need to brace for an aggressive tightening (BoE) cycle ahead, with the potential for much higher price levels in light of the energy price cap hike in April”.
Scholar also pointed to “the possibility of further supply restrictions if tensions between Russia and Ukraine flare up again”.
World oil prices hit their highest levels since 2014 this week, before cooling off as investors become increasingly concerned about energy supplies in the event of a war between major producer Russia and Ukraine.
As prices rise in the UK, hundreds of people protested in London and other cities on Saturday demanding government action to tackle the soaring cost of living.
One of the marches organized by The People’s Assembly went to Downing Street in London, where they called for the resignation of scandal-stricken Conservative Prime Minister Boris Johnson.
Similar demonstrations were held in several British cities, including Glasgow in Scotland, where a sign read “Freeze Prices Not the Poor”.
Many protesters’ banners mock Johnson for breaking down Downing Street celebrations amid a police investigation into whether the festivities were legal and have shaken his premiership.