Inflation in the UK has reached an almost 30-year high of 5.5%

UK consumer prices rose at their fastest annual pace in nearly 30 years in January, putting more pressure on households and increasing the chances that the Bank of England will raise interest rates for the third consecutive meeting. Since December, the regulator has already raised interest rates twice: from 0.1% to 0.5%. Analysts expect that the rate may be increased to 0.75% or 1% as early as March. 

According to the Office for National Statistics, the annual rate of consumer price inflation rose to 5.5% – the highest level since March 1992. Analysts predicted that inflation would remain at the December 5.4% level. 

Core inflation (excluding volatile prices for energy, food, alcohol and tobacco) rose to 4.4% in January from 4.2% in December, which is the highest since 1997.

Earlier this month, the Bank of England revised its inflation forecasts and assumed that inflation would peak at around 7.25% in April (amid a 54% increase in electricity costs). High energy prices have so far been the strongest contributor to rising inflation in the UK, although supply chain problems have also driven up prices for many other goods.

The British central bank does not expect inflation to return to the 2% target until early 2024, although most economists believe that inflation will still fall faster.

The UK is not alone in the sharp rise in the cost of living. Consumer price inflation in the US reached a 40-year high of 7.5% in January, while inflation in the eurozone was 5.1% (which is the highest since the creation of the single European currency).