By Oyintari Ben
According to official data released on Wednesday, a day before the Bank of England (BoE) releases its most recent interest rate decision, British inflation unexpectedly increased to 10.4% in February due to rising food prices and more expensive drinks at bars and restaurants.
The annual CPI rate was expected to decline from January’s 10.1% to 9.9% in February and move farther away from the 11.1% record-breaking high set in October, according to economists surveyed by Reuters.
On Thursday, the BoE is expected to disclose whether it has increased interest rates for the eleventh meeting.
Due to the recent turmoil in the global banking industry, investors are divided on whether it would halt its recent hikes in borrowing costs.
Head of fixed interest research at Quilter Cheviot Richard Carter stated, “Given the market swings of late, this puts the Bank of England in an exceedingly difficult position as it may not be enough for the Bank of England to press stop on the rate hikes.
Following the release of the statistics, the sterling appreciated against both the dollar and the euro.
The probability that the BoE will increase rates by at least a quarter point was 100%, according to interest rate futures, up from just over 50% late on Tuesday.
The ONS stated that shortages of salad ingredients also contributed to the increase in inflation last month but that the end of January discounted drinks at bars and restaurants were the main driver.
“Food and non-alcoholic drink prices rose at their fastest rate in more than 45 years, with particular increases for some salad and vegetable items as high energy costs and unfavourable weather across parts of Europe led to shortages and rationing,” ONS Chief Economist Grant Fitzner said.
In February, higher costs for alcoholic beverages contributed 0.17 percentage points, while higher prices for food and non-alcoholic beverages contributed 0.15 percentage points.
Food and non-alcoholic beverage inflation increased to 18.0%, its highest level since 1977.
The US CPI rate dropped to 6.0% in the year leading up to February, while British inflation increased. Inflation in the euro zone also decreased last month, although underlying price increases accelerated.
According to finance minister Jeremy Hunt, the predicted fall in inflation cannot be taken for granted based on the facts.
Hunt said, “Falling inflation isn’t inevitable, so we need to stick to our plan to halve it this year.”
