The annual inflation rate rose to 7.0% in March from 6.2% in February, the highest level 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 this time of year since the Office for National Statistics began keeping records in 1988. Behind this growth was a wide rise in prices, ranging from automotive fuel to food and furniture.
Households are facing the biggest drop in the cost of living since records began in the 1950s, according to British budget projections, and higher inflation is also another piece of bad news for the government.
Johnson and Sunak were fined by police on Tuesday for attending Johnson’s June 2020 birthday party at his Downing Street office during COVID-19 restrictions, leading to calls from political opponents to step down.
Sunak, previously seen as a leading candidate to succeed Johnson as prime minister, has seen his popularity tumble after a March budget statement that the public felt did 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 burden by providing around £22bn ($29bn) of support this fiscal year,” Sunak said after the data.
Jack Leslie, senior economist at the Resolution Foundation think tank, said Sunak will be forced to do more.
“The scale of this inflation-driven pressure on living standards makes it all the more remarkable how little support the chancellor provided in his spring statement — a decision that will certainly have to be revisited before the fall budget is passed,” Leslie said.
Inflation in the UK has shown an unprecedented increase over the past year, following the same pattern as in most other advanced economies, as energy prices rose and supply chain problems from the pandemic persisted.
Russia’s invasion of Ukraine on February 24 sent energy prices even higher, and last month the UK’s Office of Accountability predicted that inflation would hit a 40-year peak of 8.7% in the last quarter of 2022.
Financial markets are almost certain that the Bank of England will raise interest rates to 1% from 0.75% on May 5, and then bring them to 2%-2.25% by the end of 2022, although many economists expect this to be less aggressive.
The Bank of England is forecasting a sharp slowdown in economic growth during this year as pressure on the cost of living increases.
Samuel Tombs, chief economist at Pantheon Macroeconomics in the UK, forecasts inflation to reach 8.8% in April after utility bills skyrocket, but then fall below the Bank of England’s target of 2% in the second half of next year.
Wednesday’s data showed that the core consumer price index, which excludes food, energy, alcohol and tobacco prices, rose to 5.7% in March from 5.2% in February.
Retail price inflation — an older measure that the ONS says is imprecise but widely used in commercial contracts and to set interest payments on inflation-linked government bonds — rose to 9.0%, its highest ever since 1991.
There were signs of further inflationary pressure ahead as producers raised their prices by 11.9% in the 12 months to March, the biggest jump since September 2008.
Manufacturers’ raw material costs jumped 19.2%, with the biggest record increase starting in 1997.