In February, UK inflation exceeded expectations by rising to 10.4% from 10.1% in January, defying predictions of a decrease to 9.9%.
The Office for National Statistics (ONS) reported that the consumer prices index (CPI) climbed 1.1% in February 2023, up from 0.8% in February 2022.
While restaurants and cafes, food, and clothing made the most significant upward contributions to the monthly change, there were partial offsets from downward contributions made by recreational and cultural goods and services (particularly recording media) and motor fuels.
In February 2023, the CPIH, which includes owner occupiers’ housing costs, increased by 9.2%, up from 8.8% in January. The housing and household services sector, mainly due to electricity, gas, and other fuels, as well as food and non-alcoholic beverages, were the primary contributors to the annual CPIH inflation rate.
On a monthly basis, the CPIH increased by 1.0% in February 2023, compared to 0.7% in February 2022. Simon French, Panmure Gordon’s chief economist, described the number as “much hotter,” and stated that it could tip the balance for a data-dependent Bank of England towards 25bp at this week’s MPC meeting, despite recent financial sector turbulence.
John Leiper, Titan Asset Management’s chief investment officer, remarked that the unexpected increase “is a genuine concern for the Bank of England, which will need to maintain its course on further rate hikes, increasing the likelihood of a recession later in the year.”
Following the Office for National Statistics’ announcement of an unexpected inflation rise in February, the pound surged, adding pressure on the Bank of England to increase interest rates. The pound has strengthened 0.4% against the dollar and is approaching $1.23. Additionally, it has appreciated by almost 0.5% against the euro, reducing the euro’s worth to less than 88p.
