Data published by the Office for National Statistics (ONS) showed that consumer prices rose by 10.4% per annum in February after rising by 10.1% per annum in January. It marks the first increase in four months. Economists had expected CPI growth of 9.9% per annum. The increase in the annual inflation rate mainly reflected price rises in the restaurants and hotels, food and non-alcoholic beverages, and clothing and footwear divisions. These were partially offset by downward effects coming from recreation and culture, and from motor fuels within the transport division.
Meanwhile, core CPI - which excludes energy, food, alcohol and tobacco - rose 6.2% per annum after rising 5.8% per annum in January. This was the strongest growth since December 2022. Consensus estimates suggested an increase by 5.7% per annum.
On a monthly basis, the consumer price index rose by 1.1%, offsetting a 0.6% drop in December. Economists had expected CPI growth by 0.6%. The largest upward contributions to the monthly change in CPI rates came from restaurants and cafes, food, and clothing, partially offset by downward contributions from recreational and cultural goods and services (particularly recording media), and motor fuels.
According to the latest forecast of the Bank of England, inflation will slow down to the target level of 2% and below in the long term. As economic growth is expected to remain relatively subdued, the inflationary trend will matter most to Bank of England policy. The Bank of England is expected to raise rates by 25 bps this week, to 4.25%, which is less than the 50 bps increase in January.