London (AFP) - British annual inflation accelerated to a near 30-year high in December, official data showed Wednesday, stoking fears over a cost of living squeeze as wages fail to keep pace.
Economies worldwide are battling decades-high inflation that is forcing central banks to lift interest rates, including the Bank of England (BoE) which last month raised its key borrowing cost for the first time in more than three years.
The UK's inflation rate hit 5.4 percent last month, rising further above target on price gains for clothing, domestic energy, food and furniture, the Office for National Statistics said in a statement.
The BoE, whose chief task is to keep inflation close to a 2.0-percent target, is now expected to hike again at its next meeting in February amid easing concerns over economic fallout from the Omicron coronavirus variant.
The pound on Wednesday hit a 22-month peak versus the euro on increased hopes of another rate rise.
Finance minister Rishi Sunak insisted the Conservative government understood the cost of living squeeze.
However, the main opposition Labour Party argued that families would be rocked by "substantial" tax rises and "huge" increases in energy bills.
'Cost of living squeeze'
The cost of living in Britain is forecast to soar even higher in April owing to a tax hike and further planned increases to domestic energy bills, according to analysts.
National insurance, paid by workers and employers, is being lifted to help fund social care for the elderly.
Analysts expect more painful tax increases to foot the vast bill for Covid.
In addition, electricity and gas prices are set to rocket higher when the UK government shortly lifts a cap on energy bills amid record-breaking wholesale costs.
"With consumer prices rising at their fastest rate for three decades and wage growth slowing, Britons are being squeezed ever harder by the cost of living," said Jay Mawji, head of trading provider IX Prime.
UK annual inflation was last higher in March 1992 when it had stood at 7.1 percent.
The rate had already forged a decade-high of 5.1 percent in November.
"The inflation rate rose again at the end of the year and has not been higher for almost 30 years," said ONS chief economist Grant Fitzner.
"Food prices again grew strongly while increases in furniture and clothing also pushed up annual inflation."
Consumers and businesses are struggling with surging costs, hit also by ongoing pandemic turmoil and supply chain problems.
At the same time, real wages in November fell on the year for the first time since mid-2020 following a spike to inflation, official data showed Tuesday.
Rate hike 'inevitable'
"More pain lies ahead in the form of tax rises in April and a likely 50-percent jump in energy bills," added Mawji.
The BoE has in December raised its key borrowing cost to 0.25 percent from a record-low level of 0.1 percent, as it attempted to combat inflation.
Capital Economics economist Paul Dales forecast the BoE would hike rates to 0.5 percent next month.
Equity trader Marc Kimsey, at stockbroker Frederick & Oliver, agreed that a February rate hike would now be "inevitable".
Bank of England governor Andrew Bailey is set to be grilled over rocketing inflation at a parliamentary committee later Wednesday.
