On the go: Inflation in the UK has reached its highest level since March 1992 as the cost of living continues to rise.
The rate of inflation hit 5.5 per cent in the 12 months to January, according to data published on February 16 by the Office for National Statistics.
Increasing prices for clothing and footwear pushed the rate up, an area of the economy that normally sees price falls in January due to sales.
The rate rise means the Bank of England has missed its 2 per cent monthly inflation target each month since May last year.
The inflation rate, which was 5.4 per cent in December, will heap more pressure on the central bank to raise interest rates in its March meeting in order to curb the price rises.
Ambrose Crofton, global market strategist at JPMorgan Asset Management, said there has been plenty for Bank of England hawks to feed on in recent economic data, including a tight labour market, high inflation and concerns that energy prices will soar when the cap is lifted in April.
“The Bank of England faces a difficult balancing act,” he said.
The BoE needs to assert its credibility and commitment to bringing down inflation, he said, adding that at the same time it does not want to hamper the nascent recovery given all the work done to support the economy in the past two years.
Crofton added: “For now we think that means tightening 25 basis points at each meeting in the coming months, though some members may feel inclined towards a faster pace as we saw at the February meeting.”
The central bank raised the base rate of interest to 0.5 per cent in February, which could result in up to £100bn in long-term liabilities being removed from UK pension schemes, according to analysis from XPS Pensions Group.
This article originally appeared on FTAdviser.com
