Inflation jumped unexpectedly to 10.4 per cent in February as meals costs rise at their highest price for 45 years, placing stress on the Financial institution of England to additional increase rates of interest this week.
The speed of Shopper Costs Index inflation was up from 10.1 per cent in January, the Workplace for Nationwide Statistics mentioned, regardless of the Financial institution saying final month it believed inflation had peaked from its excessive of 11.1 per cent late final yr.
Analysts nonetheless anticipate inflation to fall over the course of 2023 as sky-high vitality payments – the primary driver of inflation – begin to come down with falls in gasoline and electrical energy prices.
Most economists had been anticipating CPI to lower to 9.9 per cent in February and say the shock rise was attributable to a scarcity of greens pushing up the worth of meals, in addition to alcohol costs in pubs and eating places rising after discounting in January.
Economists had been on the fence about whether or not Britain’s central financial institution will go for one other price rise at Thursday’s Financial Coverage Committee (MPC) assembly, following a interval of instability within the world banking sector.
However many now suppose the MPC will enhance the bottom price by a minimum of 0.25 proportion factors, to 4.25 per cent from the present price of 4 per cent, piling extra stress on debtors.
Craig Erlam, a senior market analyst for buying and selling firm OANDA, mentioned the inflation figures had been a “crushing blow” for the Financial institution.
“No matter flexibility the Financial institution of England could have thought it might have on Thursday was worn out by Wednesday morning’s inflation knowledge and as soon as extra, the subject of dialog has shifted as to if 0.25 proportion factors shall be sufficient.”
He added there may be “nothing that will justify a pause” in elevating rates of interest, “even towards the backdrop of economic stability issues and the knock-on results of aggressive price hikes.”
The federal government has set a goal of halving inflation by the top of the yr however economists have warned folks face a “two-year residing normal squeeze” on account of tax rises and higher-than-average vitality payments persisting.
After the Spring Price range was introduced, The Workplace for Price range Accountability (OBR) mentioned that the UK ought to anticipate the most important fall in residing requirements on file, with actual households’ disposable revenue per particular person set to tumble 5.7 per cent between 2022/23 and 2023/23.
In November 2022, CPI inflation hit 11.1 per cent, the very best mark since October 1981.
Fuel and electrical energy costs had been seen to drive November’s general rise, with meals costs experiencing the most important enhance since 1977 and the price of residing squeeze stays voters’ fundamental concern.
ONS chief economist Grant Fitzner mentioned: “Inflation ticked up in February, primarily pushed by rising alcohol costs in pubs and eating places following discounting in January.
“Meals and non-alcoholic drink costs rose to their highest price in over 45 years with specific will increase for some salad and vegetable gadgets as excessive vitality prices and dangerous climate throughout components of Europe led to shortages and rationing.
“These had been partially offset by falls in the price of motor gasoline, the place the annual inflation price has eased for seven consecutive months.”
UK inflation shot up unexpectedly final month as vegetable shortages pushed meals costs to their highest price in additional than 45 years, in accordance with official figures
(PA)
Alpesh Paleja, the CBI’s lead economist, mentioned the outlook for the months forward is “wanting extra benign,” however “this yr will nonetheless be a high-inflation atmosphere for each households and companies.”
Shadow chancellor Rachel Reeves mentioned: “The fact is that below this Tory authorities, households are feeling worse off and nothing is working higher than it did 13 years in the past.
“The price of residing disaster continues to be biting exhausting and taxes are rising, but the federal government selected to make use of the Price range handy a £1bn bung to the highest 1 per cent.”
Chancellor Jeremy Hunt mentioned that “falling inflation isn’t inevitable,” including: “We recognise simply how robust issues are for households throughout the nation, in order we work in the direction of getting inflation below management we are going to assist households with cost-of-living help price £3,300 on common per family this yr.”
