The Consumer Price Index (CPI) rate of inflation for February 2023 increased from 10.1 percent to 10.4 percent. Britons have been forced to contend with inflation-hiked prices, soaring energy bills and skyrocketing interest rates amid the rise in the cost of living over the past year.
In its announcement today of February’s inflation figures, the Office for National Statistics (ONS) shared the largest upward contributions to inflation came from housing and household services, mainly from electricity, gas, and other fuels.
Furthermore, there was a hike in the upward contributions from food and non-alcoholic beverages.
Prior to today, experts and economists had predicted that CPI inflation would fall to 9.9 percent.
The Bank of England has stated its target is to bring inflation down to two percent, with today’s announcement meaning it is more likely further intervention from the central bank is necessary.
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This represents the first rise in UK inflation in the last four months and is bring the CPI rate closer to the record 41-year of 11.1 percent from October 2022.
In a bid to mitigate the impact of inflation, the Bank of England has raised interest rates ten consecutive times in the past year.
As it stands, the base rate is at four percent and the central bank’s Monetary Policy Committee (MPC) is due to meet tomorrow to discuss potentially hiking it once again.
With inflation rising after three previous months of dropping, another interest rate increase seems guaranteed.
In reaction to today’s news, Alastair Douglas, CEO of TotallyMoney,said: “Prices are still rising at a rapid rate, albeit a slightly slower one than we’ve become used to in recent months.
“At the same time, wages are on the slide, and when adjusted for inflation have fallen by 3.2 percent since November last year. Put simply, people are taking pay cuts.
“They’re borrowing money to plug this gap, and while last week’s Budget provides some respite — it doesn’t address the issue that nearly nine million adults are struggling to cover everyday essentials.
“Even if we do reach the Bank of England’s two percent inflation target by autumn, the problem isn’t going away.”
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In his Spring Budget last week, Chancellor Jeremy Hunt cited figures from the Office for Budget Responsibility (OBR) which forecast inflation would drop to 2.9 percent by the end of the year.
However, alongside the recent turmoil in the banking sector, questions remain about whether this is at all likely to be a reality.
Alice Haine, personal finance analyst at Bestinvest, outlined what the increase to CPI inflation means for families across the UK.
She explained: “Rising inflation delivers a fresh blow to households that were hoping the financial squeeze was finally starting to ease.
“It means disposable incomes are still very much under threat when you consider the additional challenges posed by higher mortgage costs, falling real incomes, looming tax rises and the prospect that the Bank of England may hike interest rates for the 11th time in a row tomorrow.”
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Dr George Dibb, head of the Centre for Economic Justice at IPPR, warned today’s rate increase “will raise more concerns” for already struggling households.
However, the finance expert highlighted the majority of forecasts suggest the economy will improve by the end of 2023.
He said: “From an economics perspective, all eyes now turn to tomorrow’s announcement from the Bank of England’s interest rate setters.
“Rising ‘core’ inflation will raise concerns amongst central bankers that inflation is increasingly embedded. However, it’s important to note that all the major forecasters are expecting a significant drop in inflation – even deflation – later in the year.”
Tom Stevenson, investment director for personal investing at Fidelity International, blamed today’s CPI inflation rate for February on the economic “hangover” originating from 2022.
Mr Stevenson explained: “Although inflation remains in double digits at 10.4 percent, it is likely that the trend from here will be sharply lower this year.
“The Office for Budget Responsibility has pencilled in three percent for the end of the year and less than one percent in 2024 as the year-on-year comparisons become progressively easier.
“The latest reading for the year to February is a hangover from the past year’s energy, fuel and food price hikes and tells us little about where inflation is heading from here.”