Inflation in the UK will soar to its highest level since March 1992, intensifying an already tight cost of living squeeze that is hitting households, according to City experts.
Accelerating food and energy prices stoked by Russia’s invasion of Ukraine will propel inflation higher, fresh estimates released by the Office for National Statistics (ONS) on Wednesday will reveal.
Most experts think the cost of living will hit 6.7 per cent in March, up from 6.2 per cent in the previous month.
The new data will be uncomfortable reading for the Bank of England, which has a mandate to keep inflation at two per cent over the long-term, and will likely reinforce calls for it to plough ahead with interest rate hikes.
The Bank has already lifted rates at the last three meetings, taking them to pre-pandemic levels of 0.75 per cent.
Threadneedle Street will lift borrowing costs four more times this year, taking the calendar year total number of hikes to six, according to forecasts by investment banking giant JP Morgan.
The Bank’s shift in policy stands in stark contrast to last year’s agenda when it kept rates at a record low 0.1 per cent for around a year and half despite inflation beginning to take off at the back end of 2021.
Inflation in the UK is already running at a 30-year high of 6.2 per cent, stoked by a global energy crunch worsened by Russia’s invasion of Ukraine. Prices have soared on fears oil and gas flows could be restricted by the conflict.
Most economists, including the Office for Budget Responsibility, have warned the rate of price rises will hot up as the year rumbles on, potentially peaking at near nine per cent in October.
Living standards will erode at the steepest pace since 1956, caused by wages failing to keep pace with an average annual inflation rate of 7.4 per cent over the course of the entire year.
The European Central Bank is expected to keep rates in negative territory when it announces its decision on rates on Thursday despite prices rising at the fastest rate since the euro was created in 1999.