Inflation continues to surge, with the Consumer Prices Index including owner occupiers’ housing costs (CPIH) climbing to 9.2% in the 12 months to February 2023, up from 8.8% in January.
The ONS primarily attributed the increase to housing and household services, particularly electricity, gas, and other fuels, as well as food and non-alcoholic beverages.
On a monthly basis, CPIH rose by 1.0% in February 2023, compared to a 0.7% rise in February 2022.
Meanwhile, the Consumer Prices Index (CPI) increased by 10.4% in the 12 months to February 2023, up from 10.1% in January. The CPI rose by 1.1% in February 2023, compared to a 0.8% increase in February 2022.
The largest upward contributions to the monthly change in both CPIH and CPI rates came from restaurants and cafes, food, and clothing.
These were partially offset by downward contributions from recreational and cultural goods and services, particularly recording media, and motor fuels.
The CPIH rate of 9.2% represents a fluctuation around a level not seen in over 30 years, while the CPI rate of 10.4% is the highest annual inflation rate since 1981.
The ongoing inflation surge continues to impact UK households and businesses, raising concerns about the cost-of-living and economic stability.
Reaction
Paul McGerrigan, CEO at fintech broker Loan.co.uk:
“Today’s rise in the rate of inflation sends grave warning signs that the worst may not be over – and makes it more likely than ever that another interest rate rise will hit borrowers tomorrow when the Bank of England’s Monetary Policy Committee convenes.
“The Office of Budget Responsibility (OBR) has stated that the UK will avoid a technical recession this year and economists predict the UK’s inflation rate will hit the Bank of England’s two per cent target by the end of the year – however, today’s news will cast some doubt on this outcome and increase chances the MPC will increase interest rates tomorrow.
“This will also be of huge concern to households, the average consumer is significantly worse off and hundreds of thousands of families are finding it extremely tough.”
Simon Webb, managing director of capital markets and finance at LiveMore:
“The rise in inflation is disappointing and remains well above the Bank of England’s target with high growth in prices, especially in the essentials such as food and energy. The halt on the rise of the energy cap in April for a further three months is welcome but it is only a temporary measure.”
“Markets still expect the Bank of England to raise interest rates in the short term by another 0.25%, although are split between whether that happens in March or May with other global factors at play aside from the war in Ukraine.
“The emergence of a potential new banking crisis (the collapse last week of Silicon Valley Bank and Signature Bank in the US and Credit Suisse being rescued via a takeover from UBS) doesn’t bode well for the global banking system and adds a further dynamic for central banks to consider when making decisions around interest rates. The question is what impact do all of these factors have on inflation?”
Giles Coghlan, chief market analyst, consulting for HYCM:
“Unfortunately, the tide does not yet appear to be turning on inflation, as today’s annual CPI figures have come in hotter than expected, exceeding City analysts’ maximum forecasts at 10.4%. Worryingly, the core inflation moves back up to 6.2% despite expectations of a fall, signalling that the disinflationary process has yet to begin in the UK.
“Expect todays figures to fuel market tensions. Although there has been some debate that recent fears of banking contagion could see the Bank of England pausing its rate hiking cycle entirely, today’s figures complicate matters, adding pressure for the central bank to hike rates again despite wider concerns about the economy. With the Federal Reserve due to meet this evening at 18:00, central bank watchers can now expect sticky inflation figures to feed into the BoE’s decision-making. Currently, a 25 basis point hike is cautiously anticipated by the markets, where a 62% chance of a BoE hike is now expected tomorrow.”
Rohit Kohli, operations director at Romsey-based mortgage broker, The Mortgage Stop:
“This rise has taken all the forecasters by surprise as all expectations were for a drop to just below 10% given recent trends. What is concerning for everyone is that it’s being driven by food inflation, which always lags behind other price increases, and this will have an impact on all households but especially the lowest income families. The Bank of England now has a very tough decision to make on Thursday. With recent banking issues, there was a demand to hold interest rates but with these inflation figures, will they be able to? The housing market was starting to pick up in recent weeks. Another rate hike tomorrow could cool things down again. This will also re-open the debate on the government’s flagship commitment to halving inflation, with no real plan in place when they made it. What ability or control do they actually have to deliver on it?”
Craig Fish, managing director at London-based mortgage broker Lodestone:
“The Monetary Policy Committee now faces a very difficult decision. There was a wide expectation that rates may well have been kept on hold this week, but I now fear that this may not be the case and we will see a 0.25% increase. I do hope, however, that they consider the fact that this slight jump has mainly been caused by food supply costs and that a further increase in base rate will hurt the economy as a whole. I do not see this having an immediate impact on borrowers, however, as we are seeing lenders’ rates fall in general. The only people who will be affected directly will be those on a tracker mortgage if the base rate is increased.”
Jamie Alexander, director at Southampton-based Alexander Southwell Mortgage Services:
“High inflation is bad news for savers and this level of inflation is especially bad. Now all eyes are on whether the Bank of England reacts on Thursday and decides to raise interest rates for the 11th meeting in a row. This will affect borrowers on trackers and the wider property market if it subdues demand. This latest inflation data certainly provides the perfect excuse to hike rates again. I don’t think the inflation figure of 10.4% was unexpected. Regardless of January being slightly lower, it was never going to be a smooth lower trajectory to reach the predicted 2.9% by the end of the year. However, the comparison figures against other G7 countries do look bleak.”
Simon Jones, CEO of InvestingReviews.co.uk:
“With the inflation rate rising again, the value of people’s money has been further reduced and I doubt savings rates will follow suit. This is another serious blow to the Chancellor, savers, certain borrowers if the base rate rises and the broader economy. The cost of living crisis is still hitting households hard and faith in the UK government to control inflation is floundering fast.”
Mark Grant of Gloucester-based business finance broker, The Business Finance Branch:
“After a week where the Budget signposted inflation back to 2.9% by the end of 2023 and swap rates indicating that further interest rate rises may not be imminent, this morning’s Inflation data is a reminder to businesses that the route to both is not a straight line, and we are not there yet. Planning and budgeting to deal with, and trade out of, the current economic environment is still critical and necessary for many businesses.”
Gary Bush, financial adviser at the Potters Bar-based MortgageShop.com:
“This surprise rise in the inflation rate confirms that the Bank of England should not shy away from increasing the base rate at least by a further 0.5%, despite the global banking failures. The UK needs to force a lid on the inflation situation once and for all. Clearly rising rates will not be great news for certain borrowers and the property market.”
Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com: “The unexpected jump in February’s inflation figure is the last thing the Bank of England needs. Fearful of placing further pressure on bond prices, it was widely expected the central bank would leave the base rate unchanged at 4% when it meets tomorrow. With inflation proving stickier than many commentators thought, all bets are off again.”
Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial:
“Any suggestions the Bank of England was going to take its foot off the gas after the banking shock is now for the birds. Even though these figures aren’t unexpected, as food prices continue to jump due to the lag in energy costs filtering into commodities, the Bank of England still might impose a 0.5% rate hike on us.”
Riz Malik, director of Southend-on-Sea-based R3 Mortgages:
“The rise in UK inflation figures shows a slight increase, primarily due to rising prices in the pub and restaurant sectors, in an unexpected turn of events. Despite this development, inflation is still expected to significantly fall by the end of the year. Given the recent banking crisis, the Bank of England may have kept a neutral stance and refrained from raising interest rates on Thursday. However, given the most recent inflation data, a slight increase in rates is now likely.”
