As food and energy prices continue to rise, putting further pressure on UK households,UK inflation unexpectedly jumps in February, CPI rises 10.4% year-on-yearThat was higher than the 9.9 percent forecast by economists polled by Refinitiv and up from 10.1 percent in January. The CPI rose 1.1% month-on-month, beating expectations of 0.6%.
The ONS said: “The largest contributors to the upward movement in the monthly changes in the CPI and CPIH were restaurants and cafes, food and clothing, partly offset by downward contributions from entertainment and cultural goods and services (particularly recorded media) and motor fuel .”
The consumer price index (CPIH), which includes owner-occupied home costs, rose 9.2% in the 12 months ended February 2023, up from 8.8% in January.
Surprise rise in FebruaryMarking a break in a three-month streak of slowing price gains since reaching a 41-year high of 11.1% in October last year。
British households are still struggling with high food and energy bills, while workers from all walks of life have launched mass strike action in recent months amid disputes over wages and working conditions.
Chancellor of the Exchequer Jeremy Hunt told the House of Lords Economic Affairs Committee on Wednesday thatReducing inflation at current “dangerously high” levels remains at the top of the government’s agenda：
He acknowledged the view that the central bank’s accelerated pace of interest rate hikes to combat inflation had contributed to the recent turmoil in several areas of financial markets.He pointed out: “You sayIt’s absolutely true that the speed at which interest rates have risen is at the root of the volatility we’ve seen in recent monthsof. “
Inflation data for February will cause further headaches for the BoE. The Bank of England has been aggressively raising interest rates to curb inflation and will announce its latest monetary policy decision on Thursday.
Richard Carter, head of fixed interest research at Quilter Cheviot, said the downward path for inflation would not be smooth, adding that the Bank of England may be forced to keep raising rates beyond the current level of 4%.
“The BoE’s rhetoric will continue to be that inflation is the main concern, however, events in the banking sector have somewhat taken over and the MPC has been significantly divided on the best way forward,” he said.
The fallout from the collapse of Silicon Valley Bank and the bailout of Credit Suisse added another layer of complexity to the task facing central bankers around the world.
Last week, the UK’s independent Office for Budget Responsibility (OBR) forecast that UK inflation would fall sharply to 2.9% by the end of 2023. In light of Wednesday’s inflation report, Carter said the forecast was “increasingly ambitious”. “It remains to be seen how much the banking crisis will change that forecast, but it does feel like a very strong estimate,” he said.
PwC economist Jake Finney said the data was the first setback to the BoE’s mandate since inflation started falling in November last year, and highlighted that inflationary pressures were starting to diverge. “Food price inflation continued to reach new heights with further price increases in restaurants and cafes, while on the other hand transport price inflation continued to decline as petrol and diesel prices fell further,” he said.
Although the road is rough,PwC still sees inflation falling for most of 2023, closer to the bank’s 2% target. However, Finney noted: “The squeeze on living standards is not over yet.”
The Office for Budget Responsibility expects real household disposable income per capita, which measures living standards, to fall by a cumulative 5.7% in 2022/23 and 2023/24.
Finney said: “The Bank of England’s decision on Thursday is still at stake. The latest inflation data provided a setback, but the bank has made it clear that they will not be affected by the month-to-month changes in the data. WeBank of England expected to raise rates by 25 basis points. Still, further volatility in financial markets could turn sentiment toward an unchanged decision. “
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At 14:54 on March 23, Beijing time, GBP/USD was at 1.2329/30