Inflation unexpectedly jumped to 10.4% in February

The ONS says that the largest contribution (upwards) to inflation came from household services such as electricity and gas, as well as food and non-alcoholic beverages.

Economists had previously forecast a drop to 9.9%, while the Office for Budget Responsibility predicted that inflation would fall to 2.9% by the end of the year, roughly in line with the Bank of England’s target of 2%.

This surge in inflation means that UK real wages are still falling, total pay rose by 5.7% per year in the year to January; Compared to an inflation rate of 10.4%, British workers’ pay is failing to keep up with the rising cost of living.

Speculation will be abounded regarding the Bank of England’s Monetary Policy Committee’s upcoming meeting, many expect the base rate to rise, while some are offering more cautious predictions.

Commenting on UK CPI surprise jump to 10.4%, William Marsters, senior sales trader at Saxo UK, said “The UK Office for National Statistics have just published the February figures for UK inflation which have surprised markets and accelerated both MoM and YoY.

“The last three readings have seen declines from the October peak of 11.1%, and the progress has been painfully slow. And now the YoY CPI print of 10.4% is well above the analyst expectations of 9.9%. The core YoY figure also coming in hot at 6.2% vs the expected 5.7%.

“The February CPI number is notoriously hard to forecast as it is the month when items in the underlying basket can change. This surprise will disappoint markets who were hoping to see restrictive policy bringing inflation down. Rishi Sunak and the UK government will also be left wanting as halving inflation this year remains one of their key targets”