U.K. Inflation Reaches 30-Year High of 7%

Inflation hits 7% in March as Britain’s cost of living soars.

The Bank of England has increased interest rates at three consecutive monetary policy meetings, raising the costs of borrowing from its historic low of 0.1% to 0.75%, as it looks to contain runaway inflation without stomping out economic growth.

Public sector workers, who account for about a sixth of the workforce, faced the sharpest fall in public sector pay on record in February compared with the same month in 2021, as monthly figures showed the shortfall between wages growth and CPI had widened to 4.2%.

Rising fuel prices are reflected in the latest inflation figures which cover the first full month of the Ukraine conflict but do not yet include the impact of the 54% leap in the energy price cap this month.

The living standards of millions of families have fallen since prices began to rise in November after global energy shortages pushed the cost of gas to a record high.

Latest rise in CPI measures is the highest in three decades, coming a month after it hit 6.2%.

Inflation remains at its highest point since March 1992, when it stood at 7.1%.

Average petrol prices rose by 12.6p a litre between February and March, the largest monthly increase since records began in 1990, according to the ONS.

This compares with a rise of 3.5p a litre between the same months of 2021.

Prices have been increasing across the board as businesses pass on mounting costs to consumers.

Broad-based price rises saw annual inflation increase sharply again in March.Amongst the largest increases were petrol costs, with prices mostly collected before the recent cut in fuel duty, and furniture. Restaurants and hotel prices also rose steeply in March while, after falling a year ago, there were rises across a number of different types of food. The price of goods leaving UK factories has continued to rise substantially with metal and transport products both at record highs and food reaching its highest rate for over a decade. Raw material costs also rose, with a notable increase in the price of crude oil.

ONS, chief economist Grant Fitzner

Gas prices were 28.3% higher in March than a year ago, while electricity was 19.2% higher. That does not include the latest increase in the price cap.

Prices at restaurants and hotels jumped 2% between February and March 2022, the largest monthly change since the ONS data started in 1988.

The price of bread increased by 2.3% in March, and is now 5.5% more expensive than it was a year ago.

The price of lamb rose by 1.7% in the month before families sit down for an Easter meal. Lamb that is eaten across the country this weekend will cost around 16% more than last Easter.

Soaring inflation will further stoke fears, in the wake of the meagre 0.1% economic growth achieved in February, that the economy risks a period of so-called stagflation.

Rishi Sunak, under fire this month over his family's tax affairs and latterly the partygate scandal, had already faced a backlash over the Treasury's response to the deepening cost of living crisis.

There was particular anger among his critics that the spring statement last month included no new cash for those on benefits given that the Office of Budget Responsibility was predicting the biggest slump in living standards since the 1950s.