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Inflation: Cost of living rises at fastest pace for 30 years Inflation: Cost of living rises at fastest pace for 30 years
(32 minutes later)
The cost of living rose at its fastest pace in nearly 30 years in the year to December, official figures show. The cost of living rose at its fastest pace in nearly 30 years in the 12 months to December, driven mainly by higher food and energy bills.
The UK's Consumer Prices Index measure of inflation rose to 5.4% from 5.1% in November, the Office for National Statistics (ONS) said.The UK's Consumer Prices Index measure of inflation rose to 5.4% from 5.1% in November, the Office for National Statistics (ONS) said.
The last time inflation was higher was in March 1992, when it was 7.1%.The last time inflation was higher was in March 1992, when it was 7.1%.
The rising price of food and non-alcoholic drinks contributed to December's increase, as did household costs, especially energy bills. And with gas and electricity costs set to increase further soon, some analysts think it could reach that level again.
Increases in prices of furniture and clothing also contributed to the rise in the cost of living. Increases in prices of furniture and clothing also contributed to December's rise in the cost of living.
"These large rises were slightly offset by petrol prices, which despite being at record levels were stable this month, but rose this time last year," ONS chief economist Grant Fitzner said. "These large rises were slightly offset by petrol prices, which despite being at record levels were stable this month, but rose this time last year," said ONS chief economist Grant Fitzner.
INFLATION: Why prices are rising so quickly The rate continues to be well above the Bank of England's 2% inflation target.
PETROL: Are we paying too much at the pump? How does inflation work?
GAS PRICES: How can I protect myself from rising prices?
IMPACT: 'I'm so cold it feels like I'm sleeping outside'
Paul Johnson, director at the Institute for Fiscal Studies think tank, said people on low incomes would be particularly hard hit by the rises.
"Everyone, particularly those on modest incomes, has had a long period of wages not really growing any faster than prices over the last decade, so another increase at this point is going to be particularly painful," he told the BBC.
How will inflation affect me?
Inflation is the rate at which prices are rising. If the price of a bottle of milk is £1 and it rises by 5p, then milk inflation is 5%.Inflation is the rate at which prices are rising. If the price of a bottle of milk is £1 and it rises by 5p, then milk inflation is 5%.
You may not notice price rises from month to month. But right now, prices are rising so quickly that average pay is not keeping up. You may not notice price rises from month to month. But right now, prices are rising so quickly that the money people earn does not go as far.
Read more here.Read more here.
The rate continues to be well above the Bank of England's 2% inflation target. How is this affecting ordinary people?
Separate ONS figures issued on Tuesday showed that average pay rises are failing to keep up with the rise in the cost of living.Separate ONS figures issued on Tuesday showed that average pay rises are failing to keep up with the rise in the cost of living.
Regular pay, excluding bonuses and adjusted for inflation, fell 1% in November compared with the same month in the previous year.Regular pay, excluding bonuses and adjusted for inflation, fell 1% in November compared with the same month in the previous year.
'Mental pressure and stress' Paul Johnson, director at the Institute for Fiscal Studies think tank, said people on low incomes would be particularly hard hit by the rises.
"Everyone, particularly those on modest incomes, has had a long period of wages not really growing any faster than prices over the last decade, so another increase at this point is going to be particularly painful," he told the BBC.
What about younger people?
Jessica Langton, who is required to drive long journeys between farms for her job in cattle reproduction, told the BBC she had seen her petrol costs rise by £100 per month.Jessica Langton, who is required to drive long journeys between farms for her job in cattle reproduction, told the BBC she had seen her petrol costs rise by £100 per month.
The 21-year-old, who lives in Derby, is in the final year of her studies, funded by a tuition loan with a fixed interest rate.The 21-year-old, who lives in Derby, is in the final year of her studies, funded by a tuition loan with a fixed interest rate.
She is concerned that wages have not increased in line with the cost of living, which means that a sudden bill - such as a car breakdown - would be a "huge stress to cover".She is concerned that wages have not increased in line with the cost of living, which means that a sudden bill - such as a car breakdown - would be a "huge stress to cover".
Read more here on how Generation Z is dealing with inflation.Read more here on how Generation Z is dealing with inflation.
What's the outlook for the rest of 2022?
Paul Dales of Capital Economics said inflation was now expected to hit 7% by April.Paul Dales of Capital Economics said inflation was now expected to hit 7% by April.
"That would be higher than the peak of 6% that the Bank of England was forecasting when it raised rates in December," he added."That would be higher than the peak of 6% that the Bank of England was forecasting when it raised rates in December," he added.
"And although inflation will fall back thereafter, we think it will stay above 4% for all of this year and won't drop to the 2% target until April 2023.""And although inflation will fall back thereafter, we think it will stay above 4% for all of this year and won't drop to the 2% target until April 2023."
As a result, he said, the Bank of England's rate-setting Monetary Policy Committee was likely to raise interest rates faster than most people expected, with the next increase to 0.5% expected in February.As a result, he said, the Bank of England's rate-setting Monetary Policy Committee was likely to raise interest rates faster than most people expected, with the next increase to 0.5% expected in February.
INFLATION: Why prices are rising so quickly
PETROL: Are we paying too much at the pump?
GAS PRICES: How can I protect myself from rising prices?
IMPACT: 'I'm so cold it feels like I'm sleeping outside'
How much worse can it get?
The wave of inflation shows no sign of abating just yet.The wave of inflation shows no sign of abating just yet.
At 5.4% in December, the annual rate of the Consumer Price Index has never been higher since the Bank of England was given independence - and, actually, since this measure of inflation was created.At 5.4% in December, the annual rate of the Consumer Price Index has never been higher since the Bank of England was given independence - and, actually, since this measure of inflation was created.
It is only because the statisticians have modelled what CPI would have been that we can tell that this is the highest since March 1992. This is well over double and heading for treble the rate of inflation the Bank has as its legal target. Gas, electricity, food and used car prices are all surging.It is only because the statisticians have modelled what CPI would have been that we can tell that this is the highest since March 1992. This is well over double and heading for treble the rate of inflation the Bank has as its legal target. Gas, electricity, food and used car prices are all surging.
And the unfortunate news is that it is heading even higher. The Retail Price Index, an inflation measure which is still widely used by government and businesses, is already at an incredible 7.5%. Independent analysts fear the main measure will hit 7% in April when the energy price cap is raised again.And the unfortunate news is that it is heading even higher. The Retail Price Index, an inflation measure which is still widely used by government and businesses, is already at an incredible 7.5%. Independent analysts fear the main measure will hit 7% in April when the energy price cap is raised again.
But where above 6% it hits is in the hands of government and the energy companies. The gas that they will charge for has already been bought. The inflation that will push these figures yet higher in the coming months is arriving on tankers of American liquified gas.But where above 6% it hits is in the hands of government and the energy companies. The gas that they will charge for has already been bought. The inflation that will push these figures yet higher in the coming months is arriving on tankers of American liquified gas.
The concern is that not only is the predicted peak inflation getting higher, but that it will prove "stickier" than expected, remaining at high levels as the energy price cap is further raised in the autumn and beyond.The concern is that not only is the predicted peak inflation getting higher, but that it will prove "stickier" than expected, remaining at high levels as the energy price cap is further raised in the autumn and beyond.
What are politicians saying?
Chancellor Rishi Sunak said: "I understand the pressures people are facing with the cost of living, and we will continue to listen to people's concerns as we have done throughout the pandemic."Chancellor Rishi Sunak said: "I understand the pressures people are facing with the cost of living, and we will continue to listen to people's concerns as we have done throughout the pandemic."
He said the government was providing support worth about £12bn this financial year and next to help families cope.He said the government was providing support worth about £12bn this financial year and next to help families cope.
'Raw materials are more expensive' Shadow Treasury secretary Pat McFadden said: "These figures show that the cost-of-living crisis is only going to get worse in the coming months.
"Working families are already feeling the crunch. But the triple whammy of an imminent rise in the energy price cap, real wages falling and Tory tax rises coming down the tracks are going to make this crisis even worse."
How are businesses coping?
Kate Greig helps run the Kent Food Hub in AshfordKate Greig helps run the Kent Food Hub in Ashford
Kate Greig helps run Kent Food Hubs, a co-operative that helps traders and producers in the county to sell direct to customers.Kate Greig helps run Kent Food Hubs, a co-operative that helps traders and producers in the county to sell direct to customers.
She says her suppliers are seeing increases in their material costs, as well as things such as energy bills.She says her suppliers are seeing increases in their material costs, as well as things such as energy bills.
"Food is more expensive, fuel is more expensive," she said. "For my traders, raw materials are more expensive, whether that's the lentils to make a meal or the cardboard they use to package it.""Food is more expensive, fuel is more expensive," she said. "For my traders, raw materials are more expensive, whether that's the lentils to make a meal or the cardboard they use to package it."
But she says traders are reluctant to put prices up, because they are already having trouble competing with the large supermarket chains.But she says traders are reluctant to put prices up, because they are already having trouble competing with the large supermarket chains.
"They are small businesses that are already just surviving rather than thriving - they're already struggling," she said.
"They need to find a way to make it sustainable - and unfortunately, that might be on a price rise.""They need to find a way to make it sustainable - and unfortunately, that might be on a price rise."
Shadow Treasury secretary Pat McFadden said: "These figures show that the cost-of-living crisis is only going to get worse in the coming months.
"Working families are already feeling the crunch. But the triple whammy of an imminent rise in the energy price cap, real wages falling and Tory tax rises coming down the tracks are going to make this crisis even worse."
How are you being affected by the rising cost of living? Share your experiences by emailing haveyoursay@bbc.co.uk.How are you being affected by the rising cost of living? Share your experiences by emailing haveyoursay@bbc.co.uk.
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