Official figures out today confirm what many people know already – the cost of living is squeezing Britons’ pockets – but inflation has been confirmed as soaring to the highest it has been in 30 years.
UK inflation reached 5.4 percent in December as the British public found they were forced to find more money for the weekly food shop, fuel and energy with pensioners and people on low incomes hit the hardest.
Everyone is feeling the squeeze as state benefits and peoples’ salaries have not increased inline with the soaring cost of inflation.
One expert said unfortunately it’s only going to get worse. Jay Mawji, Managing Director of global liquidity provider IX Prime, said: “The inflationary headwinds have turned into a hurricane.
“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.
“More pain lies ahead in the form of tax rises in April and a likely 50% jump in energy bills.
Rachel Winter, Associate Investment Director at Killik & Co. said rising energy costs have played a huge part in rising inflation.
She stated: “Inflation is only going in one direction as prices soar.
“Household budgets are continuing to be squeezed and the ongoing pandemic disruption is leaving many uncertain of what looms around the corner.
“Rising energy costs have been a key contributor to this inflation spike, with oil prices at their highest level since 2014.
Ed Monk, associate director at Fidelity International said salaries have not caught up with inflation and the next few months will be financially painful.
He added: “With wage data yesterday showing pay rising at just 3.5 percent, families are getting poorer in real terms and the situation could last for some time.
“Again it’s fuel costs – both energy bills and motor fuel – that are adding most to the squeeze but in truth there’s upward pressure in all areas.
“The next few months, in particular, will be painful as household energy bills are forecast to rise further and a planned rise to National Insurance kicks in from April.
He continued: “The monetary policy response to inflation – raising interest rates – will only add to the squeeze but the Bank of England will feel great pressure to act and take some steam out of price rises if it can.
“Some economists are forecasting multiple rate rises this year, and the first test of that comes next month.
“The question for the next few months will be how much of the current inflation we’re seeing proves transitory, and how much will prove much harder to dislodge.
“Clearly, the financial pressure on households is likely to dampen sentiment and this could feed through to weaker growth overall.”
Sarah Coles, personal finance analyst, Hargreaves Lansdown said intervention is needed before things become even worse.
“If CPI had been around a bit longer, we wouldn’t have seen it this high for 30 years. And this isn’t the last of it: the Bank of England expects inflation to peak around 6 percent in April, but unless there’s significant intervention in the energy market, there’s every chance it could go as high as 7 percent.”