Rising Inflation Puts Britain On Course For Deepest Living Standards Squeeze In Six Decades

16th February 2022

Commenting on the latest ONS inflation data for January, which saw CPIH inflation rise to 4.9 per cent, its highest level in 30 years, and CPI inflation rise to 5.5 per cent, Jack Leslie, Senior Economist at the Resolution Foundation, said:"Inflation continued to tick up at the start of the year, putting ever more pressure on family budgets.

"But just as it's unclear the extent to which wages will respond to these price pressures, there's also uncertainty over the level at which consumer inflation will peak as factory-gate inflation continues to rise too.

"Today's increase is consistent with the Bank's view that inflation will surpass seven per cent this Spring, which could drive the deepest squeeze on living standards in six decades."

In it’s latest Monetary Policy Report, the Bank of England forecast real household disposable incomes (RHDI) to fall by 2 per cent in 2022 - the sharpest annual fall since records began in the late 1940s.

The UK economy continues to recover
By November last year, our economy was back to the size it was before Covid hit.

The number of people out of work has fallen. The unemployment rate is only slightly higher now than it was before Covid.

Since then, Omicron has slowed economic activity, but we don’t expect that to last.

As the number of new cases go down, we expect people to start spending more.

People are facing a larger than usual increase in the cost of living. That includes higher petrol prices and utility bills. This means they will have less to spend on other things.

But we still expect the UK economy to grow over the next few years.

The latest rise in inflation (4.9% CPIH, 5.5% CPI) announced today by @ONS is consistent with the Bank’s view that inflation will surpass seven per cent this Spring, which could drive the deepest squeeze on living standards in six decades.