Bank of England

Cost of living crisis: Inflation has reached a 9% high in 40 years

Inflation has reached its highest level in 40 years amid a worsening cost-of-living crisis.

The rate shot at 9% last month, the highest level since comparable figures in 1982.

Data released by the Office for National Statistics (ONS) showed a general increase in the prices of daily necessities and services during April – driven by an unprecedented 54% increase in the energy price cap, which started at the beginning of the month and record high petrol and diesel prices.

The overall consumer price index (CPI) was 7% in March, as the immediate effects of the Russian war in Ukraine were reflected in the fuel yards.

The latest crisis in the cost of living

It was on top of the current one inflation caused by the easing of COVID-19 restrictions, which saw that demand in the global economy far exceeded supply.

British households have been spared the worst jump in wholesale gas costs, first seen last summer, thanks to a price cap mechanism, as it is currently only adjusted twice a year – although soon is about to change.

Average annual gas and electricity costs below the ceiling rose by GBP 693 to GBP 1 971 on 1 April and are currently expected to reach a total of almost GBP 2 600 in the next adjustment, due in October, signaling further misery before us.

The main changes in prices during the year to April:

• Natural gas – 95.5%

• Electricity – 53.5%

• Motor fuels – 31.4%

• Furniture and maintenance – 10.7%

• Restaurants and hotels – 8%

• Food and soft drinks – 6.7%

ONS chief economist Grant Fitzner said: “Inflation rose sharply in April, driven by a sharp rise in electricity and gas prices when a higher price cap came into force.

“About three-quarters of the annual rate increase this month came from energy bills.”

He added: “The year-on-year increase in the cost of metals, chemicals and oil also continued, along with higher prices of goods leaving the factory gates. This was due to an increase in food products, transport equipment and metals, machinery and equipment.”

Earlier this month, the Bank of England released updated forecasts that inflation would exceed 10% by the end of this year – with food prices set to put more pressure on growth due to vast stocks of things like wheat being held in war-torn Ukraine.

She warned that tensions could result in a recession and rising unemployment – increasing pressure on the chancellor to provide further relief to consumers and businesses.

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