British Prime Minister Boris Johnson
British PM Boris Johnson. The BoE has already raised interest rates twice since December - lifting rates to 0.5% from 0.1%. Image Credit: Reuters

London: British consumer prices rose at the fastest annual pace in nearly 30 years last month as inflation hit 5.5 per cent, up from December’s 5.4 per cent, the Office for National Statistics said on Wednesday.

Economists polled by Reuters had forecast inflation would stay unchanged at December’s rate but it edged up to its highest since March 1992.

Earlier this month, the Bank of England revised up its inflation forecasts to predict inflation will peak at around 7.25 per cent in April, when a 54 per cent rise in regulated household energy bills take effect, squeezing households hard.

The British central bank does not expect inflation to return to its 2 per cent target until early in 2024, although most economists think inflation will fall faster.

The BoE has already raised interest rates twice since December - lifting rates to 0.5 per cent from 0.1 per cent - and financial markets expect a further rate rise to 0.75 per cent or 1 per cent on March 17 after the BoE’s next meeting.

Higher energy prices have been the biggest single factor pushing up British inflation so far, although global pandemic-related supply-chain problems have raised the price of many other goods too.

“Clothing and footwear pushed inflation up this month and although there were still the traditional price drops, it was the smallest January fall since 1990, with fewer sales than last year,” ONS chief economist Grant Fitzner said.