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Inflation in the UK climbs to 5.5 percent, highest level since 1992

According to the Office for National Statistics, consumer prices in Britain rose at the fastest rate in nearly 30 years last month, putting even more pressure on UK households and strengthening chances of a third raising of interest rates in a row from the Bank of England.

During the month of January, the annual rate of consumer price inflation reached 5.5 percent, its highest level since March 1992, when Britain was emerging from a prolonged period of high-wage inflation. According to a Reuters poll, most economists expected that the rate would hold at 5.4 percent in December.

In its latest economic forecast, the Bank of England predicted that inflation in April will rise to 7.25 percent, when households' energy bills will increase by more than half.

Inflation surprises in the UK this morning reinforce a recent global trend: higher, more persistent inflation has put central banks on the defensive this year, and made it easier for them to hike interest rates, according to Ambrose Crofton, global strategist at J.P Morgan Asset Management.

At 7.5 percent, consumer price inflation in the U.S. reached a 40-year high in January. In the euro zone, inflation was a record 5.1 percent.

In addition to raising rates twice since December-to 0.5 percent from 0.1 percent-the Bank of England is expected to increase rates yet again after its next policy meeting on March 17.

Financial markets expect BoE interest rates to rise to 2 percent by the end of 2022, though most economists say they will not get close to that level.

17 Feb 2022


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