Last Updated: Mar 26, 2022

The United Kingdom inflation peaked at 6.2% in February, its higher inflation since March 1992. The soaring costs for fuel, food, and energy prices continue to exacerbate the country’s cost of living crisis.

The Consumer Price Index for February month was higher than the 5.9% annual rate expected by economists surveyed by Refinitiv and much beyond January’s prior 30-year record high of 5.5%.

CPI (Consumer Price Index) inflation was 0.8% every month, beating predictions of 0.6% rise and marking the most significant monthly CPI rise between the January and February months since 2009.

The Bank of England has raised interest rates three successive meetings of its monetary policy, increasing the cost of borrowing from its historic low of 0.1% to 0.75% to curb runaway inflation without slowing economic growth.

The Monetary Policy Committee (MPC) delivered a more dovish tone than the market had anticipated last week, noting the pressure on household incomes due to a rapid jump in commodity prices following Russia’s incursion into Ukraine. Policymakers are now expecting inflation to reach 8% by the 2nd quarter in 2022.

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The CPIH (Consumer Prices Index Including Owner Occupiers’ Housing Costs (UK)) – the most popular metric of the Office for National Statistics’ increased by 5.5% in the twelve months leading up to February 2022, a rise from 4.9% in the previous 12 months from January.

“The biggest upward contribution towards the Feb 2022 CPIH 12 month inflation rate were from household and housing services (1.39% points, mainly from gas, electricity and other fuels and the housing expenses of owner-occupiers), and transportation (1.26% point, mainly from second-hand cars and motor fuels).” The ONS (Office for National Statistics) stated in its report released on Wednesday.

Spring Statement

When Rishi Sunak, British Finance Minister, makes his Spring Statement later on Wednesday, he will be under pressure to tackle the cost of living crisis.

Many workers will see a 10% increase in National Insurance (a tax on earnings) in April, while the United Kingdom energy price cap will rise by 54% to accommodate higher prices for gas and oil, which is putting pressure on household incomes as the cost of living continues to increase. The Russian conflict in Ukraine is not ending.

“Today’s inflation report demonstrates just how grave the situation is. There is an obvious necessity for the government to intervene to stop many people from sliding into financial difficulties as their salaries are rapidly consumed,” stated Paul Craig, Portfolio Manager, Quilter Investors.

“Markets and developed economies continue to fight high inflation and the uncertainties surrounding Russia’s war against Ukraine. With the volatile market environment, the investors should be watching the markets and data closely and make their allocations accordingly.”

Dan Boardman-Weston is, the Chief Investment Officer at BRI Wealth Management, observed that while fuel prices remain the most significant factor to United Kingdom inflation, the impact of their contribution to the overall rate shows to be declining.

“The inflation data continue to suggest a few more months of the rising inflation rate. However, we anticipate this trend to slow in the coming summer. Due to the current strength in the employment market and the economy overall, it’s likely for there will be a continuation of the Bank of England will continue to fall in its path of accelerating rate hikes,” Boardman-Weston stated.

“Increasing rates when household bills are growing and taxes are rising might impede economic recovery by putting too much pressure on consumers.” The Bank will have to strike a careful balance between keeping inflation under control and not sending the economy into recession.”


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