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UK News: inflation rate in surprise rise to 10.4%

UK inflation has jumped unexpectedly on the back of food prices surging at their highest rate for 45 years, piling pressure on the Bank of England to increase interest rates again this week.

Adding to the squeeze on household incomes, the consumer prices index (CPI) accelerated to 10.4% last month from 10.1% in January, with prices driven higher by a rise in the cost of drinks, meals out and fresh food as salad items ran short.

Goods and services have increased dramatically in price since last year when the official inflation rate was nearer 6%, and by 17.2% over the past two years. Inflation was close to zero in February 2021.

The ONS said the cost of food and non-alcoholic beverages in particular had risen by about 18% in the year to February, its highest rate since August 1977.

February’s rise in CPI came as a shock to City analysts, who had predicted a fall to 9.9% in response to reducing gas and oil prices and the lower cost of raw materials on global markets. Inflation had fallen for the previous three months, cooling from a peak of 11.1% in October to reach 10.1% in January.

Labour accused the government of making families worse off, while business leaders said they were concerned persistently high inflation was damaging Britain.

The Resolution Foundation thinktank said hospitality and food costs were driving price rises, meaning that “‘lower-income families are facing the greatest price pressures of all, with an effective inflation rate above 12%”.

The figures are likely to add to pressure on the Bank of England policymakers to raise interest rates when they meet on Thursday, despite growing fears over the unfolding crisis of confidence in the global banking system after the failure of Silicon Valley Bank in the US earlier this month and the weekend rescue of the Swiss lender Credit Suisse.

Rob Morgan, the chief investment analyst at the stockbroker Charles Stanley, said Britain’s high level of inflation “kept coming back, like the Terminator” and gave the Bank “every reason to hike interest rates”.

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