Andy Bruce and David Milliken

LONDON, (Reuters) – The British consumer price inflation rose to 5.4% in December, more than was expected, according to official data. This puts pressure on Bank of England to increase interest rates next month.

Reuters polled economists and predicted that December’s annual CPI would rise to 5.2% from November’s 5.1%.

According to the Office for National Statistics, CPI rose to the highest level since March 1992 because of a broad range goods and services. Restaurants and hotels had the most significant impact, while food and drinks had the largest.

The Omicron version of the coronavirus that was transmitted in December to cause economic disruption has had a minimal impact on inflation’s headline rate.

Last month, the Bank of England became the first central bank in the world to increase interest rates after the COVID-19 pandemic. This was just one day after the CPI for November reached a 10 year high.

The rising inflation has become a political problem in Prime Minister Boris Johnson’s government. He faces demands from opposition parties and charities for compensation of the expected 50 percent increase in household energy prices.

Rishi Sunak, finance minister, said that he understood the stress people feel about the rising cost of living and would continue to listen when people have concerns.

CPI, according to the BoE will reach a peak of about 6% in April (30 years ago) due to rising energy prices. CPI’s return to its goal of 2% will likely take longer than two more years.

Are RATES SET TO RISE AGAIN

The BoE is expected to raise interest rates on February 3. It will also announce that its $875 billion ($1.19 Trillion) inventory of bonds will be allowed to decline as the gilts mature.

Kitty Ussher is the chief economist of the Institute of Directors. She said that she expects the BoE’s main interest rate increase to 0.5%, from 0.25%, next month. It was particularly striking to see a 4.2% increase in food prices annually.

This is “not only additional evidence that inflation has become endemic, but it also bodes well for households faced with multiple increases in the cost to live this spring,” she stated.

The core CPI (which excludes volatile foods, energy and tobacco prices) rose by 4.2% to December’s record 3.9%, according to Wednesday’s data.

Retail price inflation, an older measurement that the ONS states is not accurate but is still used widely by government and business, rose to a new 30 year high of 7.5% December from 7.1% November.

The factory prices data suggested that costs may be at an all-time high, in line with surveys by companies from last month. Factory prices were 9.3% more than December 2020. That’s a decrease of 9.4% from November, and the first decline in annual rates since July 2020.

December also saw a decrease in inflation rates for energy and material producers, which fell to 13.5% from 15.2%.

($1 = 0.7352 pounds)