Inflation hits 30 year high as food prices rocket

Inflation has hit its highest level since 1992 as food bills continue to soar.

The annual inflation rate surged to 5.4pc from 5.1pc in November, according to fresh figures from the Office for National Statistics this morning.

This news comes ahead of the increased energy cap price scheduled to come into force from 1 April, and the 1.25 per cent hike in national insurance contributions also set to be rolled out from April.

It is estimated that the impact on living costs will be so great that someone earning £50,000 would require a 10 per cent bump in yearly pay to dodge a cut to their real-term salary.

The situation means the Bank of England will likely vote for a second hike in interest rates following November’’ decision.

Commenting on the new figures, Julian Jessop, an economics fellow at free market think tank the Institute of Economic Affairs, said:

“The further rise in inflation in December is a classic example of too much cheap money chasing too few goods, and services.

“It is tempting to attribute the surge in inflation to whichever prices happen to be increasing the most, particularly essentials such as energy and food. However, the underlying cause is the huge amount of new money that has been pumped into the global economy by central banks. This is likely to keep inflation higher for longer, even if some prices fall back.

“The onus should therefore be on central banks to withdraw this monetary stimulus more quickly, both by raising interest rates and starting to sell assets purchased under the policy of quantitative easing.

“The government should not attempt to tackle inflation by setting individual prices, which is sure to backfire. Markets need to be allowed to work properly, including energy markets, and more state intervention could simply distort price signals.

“Instead, the government should focus on helping the most vulnerable households, which is best done via the benefit system. Now is also a particularly bad time to be adding to their burden by raising taxes.”