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UK inflation hits 30-year high

19 Jan 2022 11:25 AM

UK CPI rose in December by 5.4% more than expected and its highest level in nearly 30 years, which could pressure the Bank of England to raise interest rates again when they meet next month.

The Office for National Statistics said the increase in the CPI to its highest levels since March 1992 reflected a broad range of goods and services, with the largest impact coming from food and drink, followed by restaurants and hotels. However, the economic turmoil caused by the Omicron variant in December had only a small impact on the main rate of inflation.

The Bank of England last month became the world's first major central bank to raise interest rates since the start of the pandemic, a day after November's consumer price index reached a 10-year high. The Bank of England expects the CPI to reach a 30-year high of around 6% in April due to rising energy bills, and that it will take more than two years for the CPI to return to its 2% target.

Core CPI - which exclude the volatile food, energy, alcohol, and tobacco prices - rose to a record 4.2% in December from 3.9% in November.

The British pound is trading near its highest levels since yesterday's trading against the US dollar, around the 1.3607 levels, and with prices trading below these levels may support pullback again to test the bottom at 1.3570. However, if it succeeds in surpassing the 1.36 areas and stabilizing above it, it may push the pair to continue rising to 1.3630/1.3660 levels.

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