Live Updates: Fed rate decision countdown
Shoppers browse stalls at Ridley Road Market in the Hackney district of London, Britain, on March 18. (Jose Sarmento Matos / Bloomberg / Getty Images)
UK consumer prices rose 10.4% in February compared with a year earlier, as food inflation rose to its highest level in more than 45 years, and as the cost of going to restaurants and hotels rose, official data showed. Showed up on Wednesday.
Food prices rose 18.2% over the year to February, the fastest increase since the 1970s. The Office for National Statistics recorded a particular increase for some salad and vegetable items, partly due to shortages that led to rationing by supermarkets.
The surprise rise in inflation in February followed months of a slowdown as the pace of price rise in October hit a 41-year high of 11.1%.
The latest data could make it more likely that the Bank of England will hike interest rates again when it meets on Thursday.
Although the recent turmoil in the banking sector is expected to weaken economic activity, as lending norms tighten, and therefore reduce inflation, “well before the Bank of England stops raising interest rates, its solid wants to see evidence,” said Paul Dales, chief UK economist at Capital Economics.
“It’s still a very close call, but these data give us a little more confidence in our forecast that the Bank will raise interest rates tomorrow from 4% to 4.25%.”
But Samuel Tombs, UK chief economist at Pantheon Macroeconomics, said a rise in food inflation and catering services inflation accounted for the increase in the headline rate and both were linked to a jump in the price of fresh food as a result of a poor harvest.
“This boost should subside in the coming months,” he said on Twitter. “It doesn’t make sense to raise rates to counter seasonal surges in food prices.”
Core inflation – which strips out volatile food and energy costs – also rose, coming in at 6.2% in the year to February from 5.8% in January.
The data complicates the central bank’s decision on whether it should raise rates for an 11th consecutive time on Thursday — and make it harder for the government to meet its January promise to halve inflation this year.
And the people of Britain are still getting poorer. Wages rose 6.5% in January from a year earlier, well below the rate of inflation in both that month and February.