UK inflation has increased to 5.5 per cent, the highest in decades.
The rate of Consumer Price Index inflation increased to 5.5 per cent in January from 5.4 per cent in December, the Office for National Statistics has said.
Grant Fitzner, chief economist at the Office for National Statistics (ONS), said: “Inflation ticked up again in January, reaching a near 30-year high.
“Clothing and footwear pushed inflation up this month and although there were still the traditional price drops, it was the smallest January fall since 1990, with fewer sales than last year.
“The rising costs of some household goods and increases in rents also pushed up inflation. However, these were partially offset by lower prices at the pump, following record highs at the end of 2021.
“Some annual changes this year are affected by last year’s lockdown, when many services were unavailable.”
Chancellor Rishi Sunak said: “We understand the pressures people are facing with the cost of living.
“These are global challenges but we have listened to people’s concerns and recently stepped in to provide millions of households with up to £350 to help with rising energy bills.
“We’re also helping people on the lowest incomes keep more of what they earn by cutting the Universal Credit taper rate and freezing alcohol and fuel duties to keep costs down.
“In total, we’re providing support with the cost of living worth over £20 billion across this financial year and next.”
Colin Dyer, client director at Abrdn Financial Planning, said households should brace themselves for further acceleration of the cost of living crisis.
“The Bank of England could also be justified in raising interest rates more than once over the next few months to defend these soaring prices – meaning even more challenges may lie ahead for households,” Mr Dyer said.
“The most important thing savers can do now is review how this environment will affect their finances, where they are keeping their savings, and make adjustments as necessary. For example, holding significant amounts of cash in a deposit account is effectively losing money in an inflationary environment, so depending on attitude to risk, investing in a Stocks and Shares ISA may provide a greater return if investing for the longer term.”
It comes as figures revealed that UK workers took a pay cut in the final three months of last year as the soaring cost of living outstripped wage increases.
Latest data from the Office for National Statistics made grim reading for British households, who face the biggest squeeze on living standards in decades.
Total pay growth rose to 4.3 per cent for the quarter to December – from 4.2 per cent for the three months to November – but continued to lag behind inflation, which surged to a near 30-year high of 5.4 per cent in December, propelled by huge increases in energy and fuel costs.
Economists expect inflation to spike further to around 7 per cent by April when millions of households will be hit with a 54 per cent jump in their energy bills. Borrowers face a further squeeze after the Bank of England raised interest rates this month, with further hikes predicted.
Some of the pain is likely to be cancelled out by rising wages, with early estimates indicating employers were beginning to increase salaries in response to rising inflation.
Workers’ bargaining power is being boosted by staff shortages in a number of industries. Total vacancies rose to another record of 1.3 million between November and January, the ONS said.