The annual inflation rate rose to 7.0% in March from 6.2% in February, the highest since March 1992 and more than expected by most economists in a Reuters poll, official data showed on Wednesday.
The monthly increase was the highest for the season since the Office for National Statistics began keeping records in 1988. Behind the increase were broad-based price increases, ranging from fuel for vehicles to groceries and furniture.
Households are facing the greatest pressure on the cost of living since records began in the 1950s, according to UK household forecasts, and overshooting inflation is further bad news for the government too.
Johnson and Sunak were fined by police on Tuesday for attending a birthday party for Johnson in June 2020 at his Downing Street office at a time of COVID-19 restrictions, prompting calls for his resignation from political opponents.
Sunak – previously seen as a leading candidate to succeed Johnson as prime minister – has slipped in popularity after a budget statement in March that the public felt did too little to ease pressure on the cost of living.
“I know this is a worrying time for many families, which is why we are taking action to ease the strain by providing around £22 billion ($29 billion) worth of support this financial year,” Sunak said according to the data.
Jack Leslie, senior economist at the Resolution Foundation think tank, said Sunak would come under pressure to do more.
“The sheer magnitude of these inflationary pressures on living standards makes it all the more remarkable how little support the chancellor provided in his spring statement — a decision that will certainly need to be reviewed before the fall budget,” Leslie said.
UK inflation has seen an unprecedented surge over the past year, following a similar pattern to most other advanced economies as energy prices soared and pandemic supply chain difficulties continued.
Russia’s February 24 invasion of Ukraine pushed energy prices even higher, and last month the UK’s Office for Budget Responsibility forecast inflation to hit a 40-year high of 8.7% in the final quarter of 2022 would.
Rising rates
Financial markets are all but certain that the Bank of England will hike interest rates to 1% from 0.75% on May 5 before raising them to between 2% and 2.25% by the end of 2022, although many economists believe it will assume they will be less aggressive.
The BoE forecasts economic growth to slow sharply later this year as pressure on the cost of living mounts.
Samuel Tombs, UK chief economist at Pantheon Macroeconomics, forecasts inflation will hit 8.8% in April after fiscal bills have rocketed but then fall below the BoE’s 2% target in the second half of next year will.
Data on Wednesday showed that the core CPI, which excludes food, energy, alcohol and tobacco prices, rose to 5.7% in March from 5.2% in February.
Retail price inflation – a legacy measure that the ONS says is inaccurate but widely used in commercial contracts and to set interest payments on inflation-linked government bonds – rose to 9.0%, the highest since 1991.
There were signs of further inflationary pressures as manufacturers increased prices by 11.9% in the 12 months to March, the largest increase since September 2008.
Manufacturers’ raw material costs increased by 19.2%, with the largest increase in records starting in 1997.