By Ian McConnell
UK inflation has climbed to a fresh 30-year high, as the cost-of-living crisis intensifies for households.
Official figures show annual UK consumer prices index inflation rose from 5.4% in December to 5.5% in January.
Annual inflation on the old all-items retail prices index measure surged from 7.5% in December to 7.8% last month, the figures from the Office for National Statistics show.
The rapidly worsening inflation outlook has heightened expectations of further swift rises in UK interest rates from the Bank of England.
Colin Dyer, client director at abrdn Financial Planning, said: “After finishing 2021 on a 30-year high, UK inflation continued to climb in January.
“Households should brace themselves for further acceleration in the cost of living until at least the second half of 2022, particularly when the energy price hike is implemented in April. The Bank of England could also be justified in raising interest rates more than once over the next few months to defend these soaring prices – meaning even more challenges may lie ahead for households."
Suren Thiru, head of economics at British Chambers of Commerce, said: “Rising inflation highlights both the cost-of-living crisis facing households and the uphill struggle for businesses to keep a lid on price rises amid surging cost pressures.
“While the headline annual figure remains at a 30-year high, the decline in monthly inflation in January offers some hope that we may be nearing the peak in the current spike in inflation. "
He added: "“Inflation should peak at over 7% in April as reversal of the hospitality VAT cut and the energy price cap rise enters the calculation. However, the current Russia-Ukraine tension could keep inflation higher for longer by triggering a further surge in wholesale energy costs.
“Rising inflation could well be a significant drag anchor on UK economic output this year by weakening consumer spending power and damaging firms' finances and ability to invest."
The Bank of England has predicted annual UK CPI inflation will peak at 7.25 per cent in April.
A poll published this week revealed a further quarter-point rise in UK base rates next month, to 0.75%, is now forecast by nearly two-thirds of economists.
Twenty-five out of 40 economists polled by Reuters between February 7 and 11 predict the Bank of England’s Monetary Policy Committee will vote for such a rise next month. The next rates decision is due to be announced on March 17.
Meanwhile, 21 out of 41 economists forecast a further rise in benchmark UK interest rates to 1% in the second quarter.
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