The UK Office for National Statistics said its estimates suggest inflation would have last been highest “around 1982”.
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LONDON – UK inflation soared to a 40-year high of 9% in April as food and energy prices soared, official figures revealed Wednesday, deepening the UK cost-of-living crisis. country.
Consumer prices rose 2.5% on a monthly basis, slightly below expectations for a 2.6% increase in a Reuters survey of economists, which had also projected a 9.1% annual rise.
The 9% rise in the consumer price index is the highest since records began in its current form in 1989, surpassing the 8.4% annual rise recorded in March 1992 and well above the 7% observed. in March of this year. The UK Office for National Statistics also said its estimates suggest inflation would have last been highest “around 1982”.
Effective April 1, the UK energy regulator increased the energy price cap for households by 54% following a rise in wholesale energy prices, including a record rise in prices world gas. The regulator, Ofgem, has not ruled out further increases to the cap in its periodic reviews this year.
Bank of England pressure
The Bank of England has raised interest rates at four consecutive meetings, raising the cost of borrowing from its pandemic-era record low of 0.1% to a 13-year high of 1%, as it seeks to curb runaway inflation without suffocating the economy. growth.
A recent survey showed that a quarter of Britons have resorted to skipping meals as inflationary pressures and a food crisis combine in what Bank of England Governor Andrew Bailey has called an “apocalyptic” outlook for consumers. consumers.
Wednesday’s mammoth inflation figure delivers another “hammer blow” to households already worried about the cost of living, and there are warnings that worse is yet to come.
“Unlike in the US, UK inflation continues to rise for the time being, stoking further cost-of-living fears,” Richard Carter, head of fixed-rate research at Quilter Cheviot, said in a news release. research.
“It will also increase pressure on the Bank of England to raise interest rates and deal with rising prices even if, by their own admission, many of the factors driving inflation are beyond their control.”
Carter suggested that pressure is likely to mount on the British government to pull fiscal levers and seek “to ease the pain for households come autumn.”
Britain’s Chambers of Commerce warned after Wednesday’s announcement that the “skyrocketing” rate of inflation and cost of living crisis facing households is hurting the ability of businesses to invest and operate at full capacity.
“The scale at which inflation is damaging key factors of UK output, including consumer spending and business investment, is unprecedented and means there is a real chance the UK could slip into recession in the third quarter of the year,” Suren Thiru, head of economics at BCC, said in a note.
“While inflation may moderate somewhat over the summer, April’s inflation spike is likely to be exceeded in October as the month’s expected peak energy price increase pushes inflation above 10%.”
The BCC called on the UK government to help consumers and businesses weather the crisis by reversing its recent increase in National Insurance, an income tax, and reducing VAT (value added tax) on business energy bills. .