UK INFLATION held at 3.0 per cent in February, unchanged from January, official data showed on Wednesday, ahead of a likely rise as conflict in the Middle East pushes up oil prices.
The Consumer Prices Index (CPI) remained above the Bank of England’s two per cent target. The latest data comes before an expected increase in inflation linked to higher oil and gas prices following the US-Israel conflict with Iran.
Lower petrol prices in February helped offset a rise in clothing costs, with prices collected before the start of the conflict and the subsequent rise in crude oil prices, the Office for National Statistics said.
Grant Fitzner, chief economist at the Office for National Statistics, said rising clothes prices last month were “offset by falls in petrol costs, with prices collected before the start of the conflict in the Middle East and subsequent rise in crude oil prices”.
Lindsay James, investment strategist at Quilter, said February’s CPI print was “old news”.
“It shows an economy where inflation appeared to be stabilising and was expected to drift towards 2.1 per cent in the second quarter.”
James added that “February is likely to represent the low point for UK inflation for some time”.
Luke Bartholomew, deputy chief economist at fund managers Aberdeen, said: “Today's inflation report is little more than a relic of the world before the Iran conflict.”
Before the US-Israeli attack on Iran at the end of February, the Bank of England had forecast inflation would fall close to its two per cent target in April, when changes to regulated household energy bills and other prices take effect.
Last week, the BoE increased its inflation forecast, predicting it would rise towards 3.5 per cent by the middle of the year.
A survey published on Tuesday by US bank Citi showed inflation expectations among the British public for the coming year rose to 5.4 per cent from 3.3 per cent, the biggest monthly increase in more than 20 years.
While most household energy tariffs are currently capped, new prices are due to take effect in July. Manufacturers have reported the sharpest jump in costs since 1992, which may be passed on to consumers.
Financial markets on Wednesday were betting on two or three quarter-point interest rate rises by the Bank of England this year, though many economists think the central bank will keep rates on hold due to the impact of higher energy costs on growth. Governor Andrew Bailey last week advised people against making any firm bets that the BoE would raise rates.
Services price inflation fell to 4.2 per cent in February from 4.4 per cent in January, its lowest since March 2022 and below economists’ expected reading of 4.3 per cent.
The decline reflected reduced inflation for restaurants, cafes and tickets for concerts and other cultural events.
Core inflation, which excludes food, energy, alcohol and tobacco prices, rose to 3.2 per cent from 3.1 per cent.
Zara Nokes, global market analyst at J.P. Morgan Asset Management, said: “The upside surprise in core inflation today will be of concern for the Bank given it shows we are still contending with sticky price pressures even before accounting for the recent spike in energy prices.”
(With inputs from agencies)
