Inflation ticked unexpectedly upwards in February, with CPI rising 1.1%% in the month, while annualised inflation kicked up to 10.4% from 10.1% in January.
The rising rate of annual inflation reflects higher food and clothing costs, particularly food where prices rose at their fastest rate year-on-year since 1977, partially offset by cheaper motor fuel and recreational activities.
Inflation had been forecast to come in at 9.9% year-on-year (Trading Economics).
Nicholas Hyett, Investment Analyst, Wealth Club “An unexpected tick up in inflation in February will put central bankers in a squeeze.
We’re already seeing fallout from the rapid rise in interest rates around the world, with weaker banks outside the UK starting to pop under the pressure. The hope was that a steady drift down in inflation would let central bankers ease back on rate rises. Instead a spike in food prices, up 18.2% and the highest it’s been since 1977, and higher prices in restaurants and hotels, up 12.1%, means the fight against inflation is not yet over.
Food inflation is already back in the disco era, the challenge for central bankers is to limit other reminders of the late 70s to flared jeans and shoulder pads. Unfortunately that leaves the Bank of England with unappealing choices – ease back on rate rises but risk leaving inflation running higher when households are already struggling, or stay in the inflationary fight and risk further economic crunches. It’s a circle that’s not easily squared.”