Cost of living crisis: UK inflation soars to 30-year high ahead of Rishi Sunak statement

UK inflation climbed to a new 30-year high soaring to 6.2% in February from 5.5% in January, the Office for National Statistics has said.

Wednesday, 23rd March 2022, 8:10 am

Rising energy bills, fuel bills and food prices drive the worst cost of living squeeze in decades.

The rise was higher than expected and comes after prices lifted across food, clothing and footwear and a range of products and services.

The ONS said inflation rose across 10 out of the 12 categories that feed into the index, with only communication and education not seeing increases.

Inflation surges to 6.2% as cost-of-living crisis escalates

The news comes ahead of Rishi Sunak’s Spring Statement at midday today amid speculation he cut fuel duty, boost benefits and raise the threshold for national insurance.

In April, Ofgem will hike the energy price cap by 54% and given the impact of Ukraine on gas prices, a further increase is expected in October, possibly by as much as another 50%.

February’s inflation data showed the increase in inflation was led by higher prices of food, clothing, and furniture and household equipment, with Covid lockdowns a year earlier dampening 2021 price rises.

Food and non-alcoholic drinks saw inflation hit 5.1% – its highest level since September 2011 – while there was a record rise across clothing and footwear.

Some of the biggest price rises in recent months have been seen at the fuel pumps, with the ONS revealing that average petrol prices hit a fresh record of 147.6p a litre in February, compared with 120.2p a litre a year earlier.

Average diesel prices were likewise the highest ever recorded last month, at 151.7p a litre.

The data also showed that the Retail Prices Index (RPI) measure of inflation remained at its highest level since March 1991 – hitting 8.2%, up from 7.8% in January.

Grant Fitzner, chief economist at the Office for National Statistics (ONS), said: “Inflation rose steeply in February as prices increased for a wide range of goods and services, for products as diverse as food to toys and games.

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“Clothing and footwear saw a return to traditional February price rises after last year’s falls when many shops were closed.

“Furniture and flooring also contributed to the rise in inflation as prices started to recover following new year sales.

“The price of goods leaving UK factories has also been rising substantially and is now at its highest rate for 14 years.”

Inflation is the rate at which prices rise, meaning if a bottle of milk costs £1 and that rises by 5p, then milk inflation is 5%.

Since December last year, prices have been rising at their fastest rate since the 1990s.

The rise comes after the Bank of England last week raised interest rates once again, to 0.75% from 0.5%, and warned inflation will now peak at around 8% in April – and could hit double-digits if wholesale energy prices continue to soar amid the Ukraine war.

Samuel Tombs at Pantheon Macroeconomics said the Bank of England will likely raise rates to 1% in May to try and rein in rampant inflation.

But he said the economic recovery is “likely to slow sharply as households feel the pinch” later this year.

“Further rate hikes would increase the risk of a recession and the chances that CPI inflation ultimately would significantly undershoot the 2% target in the medium term."