Official data revealed on Wednesday that the UK consumer price inflation had risen unexpectedly to 10.4%, mainly due to an increase in the prices of drinks in pubs and restaurants. This news came a day before the Bank of England will determine its latest interest rate decision.
According to Reuters, economists had predicted that the consumer price index (CPI) would fall to 9.9 percent annually in February from 10.1 in January and further move away from October’s peak of 11.1 percent. On Thursday, the Bank of England will decide whether to increase interest rates for the 11th consecutive time.
The central bank is dividing investors over whether it will halt a series of increases in borrowing costs amid recent upheaval in the global banking sector. Analysts estimate that the new circumstances have put the Bank of England in an extremely difficult position.
UK’s Agency for National Statistics said the end-of-January promotions on drinks prices in pubs and restaurants were the biggest factor affecting inflation last month. The prices of food and soft drinks have risen the fastest in the last 45 years, as have the prices of vegetables.
Core CPI rises to 6.2%: Experts caught off guard
The core Consumer Price Index, which does not consider energy, food, alcohol, and tobacco prices, saw an increase of 6.2% in February from the previously expected 5.7%, surpassing the January reading of 5.8%. Analysts had predicted the rate to decrease. The annual inflation rate in the services industry, seen as an accurate reflection of pricing pressure in the economy by most policymakers, rose to 6.6%, moving up from 6% in January.
British Chancellor of the Exchequer Jeremy Hunt said the data showed that the expected drop in inflation could not be taken for granted. A fall in inflation is not inevitable, so they will have to stick to their plan to cut it in half this year, Hunt said. He assessed that inflation above 10 percent is “dangerously high.”