UK inflation rose from 5.1% in November to 5.4% in December – a 30-year high, according to data released by the Office for National Statistics (ONS).
The Consumer Price Index (CPI) is driven by “rising food costs” and the “energy bill crisis”, BBC reported. And furniture and clothing prices also contributed to December’s increase in cost of living. The large increase was slightly offset by gasoline prices, ONS Chief economist Grant Fitzner, “while at a record but steady this month, was up this time last year”.
December’s 5.4% figure “beyond economists’ expectations” and deepens cost of living crisis that is “tightening household income”, FT speak. It is also “putting more pressure” on the Bank of England to raise interest rates.
Continuing to be higher than the Bank’s 2% inflation target, last month’s increase in the cost of living will cause the Prime Minister and millions of families to have a “headache”. London Evening Standard speak.
How high could inflation be in 2022?
Just two years ago inflation was at 0.6%, the Standard added. City economists now expect it to grow “up to 7% at a time energy prices hikes kick in ”. The last time inflation was at that level was in March 1992 when it hit 7.1%.
That’s a “bad outlook” for 2022, BBC reported. Paul Dales, chief economist at Capital Economics, UK, predicts that the 7% mark will be reached in April. “This would be higher than the 6% peak that the Bank of England had forecast when it raised interest rates in December,” he added. “And while inflation should ease back after that, we think it will stay above 4% for the full year and won’t fall back to the 2% target until April 2023.”
Due to the “unforeseen” increase in inflation, the FT said, the Bank faced a “dilemma”. It will come under pressure to “reduce spending” and bring inflation down to its 2% target. However, it does not want to “squeeze household budgets too far and derail resilience.”
Unions call for more support for families
Chancellor of Exchequer Rishi Sunak said he understood “the pressures people are facing with the cost of living” and that goverment will “continue to listen to everyone’s concerns as we have done throughout the pandemic.”
However, secretary general Frances O’Grady of the Trades Union Congress (TUC) has called for more government help for families facing a “double impact” from high inflation and slowing wage growth. . “The prime minister has to come up with a plan to tackle the cost of living crisis,” she said. “Those who are working need to have stronger bargaining power to get a fair raise. And families need more help with rising bills through universal credit.”
Unison union, which represents workers in the public sector, also considered, Guardians reported. Secretary-General Christina McAnea said the rising cost of living meant “growing anxiety for low-income families” and it was “terrible news” for public services. Employees who may switch jobs will “intensify their search in the new year for jobs that pay better”, she added, but health and care services “have fallen by thousands of workers” and are “likely the biggest losers”.
‘Corporation of mortgage capital’
ONS The data also reveals that the UK’s average house price rose by 10% in the year to November 2021 – this is up from 9.8% in October 2021.
The cost of living crisis is causing a “squeeze on mortgages”, Daily mail speak. Rising bills mean borrowers could miss out on new homes as banks cut lending. “After years of cheap interest rates and huge loan sharks, this year’s cost of living crisis could see mortgage lenders finally tighten their wallets.”
https://www.theweek.co.uk/business/economy/952634/how-high-could-uk-inflation-rise UK inflation: How high could the cost of living be in 2022?