West News Wire: Inflation in the United Kingdom increased in February for the first time in four months as rising food and energy prices hurt the nation’s already-strapped households.
According to the Office for National Statistics, the consumer price index increased from 10.1% in January to 10.4% in the twelve months that ended in February. Analysts who had predicted that inflation would slow to 9.9% were astonished by the results.
The data raised pressure on the Bank of England to approve a hike in interest rates for the 11th time in a row when it meets on Thursday, despite worries about the effects of pressures on the global banking system on the economy. The major bank rate is expected to increase by at least a quarter of a percentage point, according to several experts.
“In recent days, some have suggested that the febrile environment in the banking sector should give central banks pause for thought before raising rates further,” said Kitty Ussher, chief economist at the Institute of Directors, a business lobby. “Today’s data suggests the opposite the Bank of England’s job is not yet done.”
Bank of England policymakers have struggled to contain the fallout from Russia’s war in Ukraine, which drove up the cost of food and energy. Those pressures have in turn fueled broader price increases and demands for higher The inflation report highlights the pressures faced by British consumers who spent the winter with one eye on their thermostats and the other watching the steady rise of prices for staples such as milk, eggs and vegetables as the nation’s cost-of-living crisis triggered the biggest decline in living standards since the 1950s.
“February’s surprise increase in inflation will raise more concerns for households whose budgets are already stretched to their limits,” said George Dibb of the Institute for Public Policy Research, a progressive think tank. “With some of the biggest contributions to rising prices coming from essentials like food, drinks and clothing, most households will find that their pay packet doesn’t stretch as far.”
Food prices jumped 18% in the 12 months through February, compared with the 16.7% rate recorded the previous month.
Even after government subsidies designed to shield consumers from the jump in global energy prices, the average household bill for electricity and natural gas rose 27% last year.
Economists expect inflation to slow rapidly later this year as recent declines in wholesale energy prices feed through to consumers and last year’s big price increases drop out of the calculations.
The Bank of England forecast inflation will drop to 2.9% by the end of this year.
But U.K. Treasury chief Jeremy Hunt warned that more work is needed to head off further price increases.
“Falling inflation isn’t inevitable, so we need to stick to our plan,” he said.