UK inflation passes Bank of England target to reach 2.3%
Increase in annual inflation from January to February was biggest since October 2012
Consumer prices in Britain rose by a stronger-than-expected 2.3% in annual terms in February
British inflation last month shot past the Bank of England’s 2 per cent target for the first time since the end of 2013, potentially adding to uneasiness among some officials at the central bank about keeping interest rates near zero.
Consumer prices rose by a stronger-than-expected 2.3 per cent in annual terms, the biggest increase in nearly 3½ years, and up sharply from 1.8 per cent in January, the UK’s Office for National Statistics said on Tuesday.
Last week one of the Bank of England’s policymakers voted for a rate increase given the rise in inflation and no sign of the economic slowdown expected after Britain voted to leave the EU. Other policymakers said it would not take much more news about rising inflation or growth to make them follow suit.
Ruth Gregory, an economist at Capital Economics, said most Bank of England policymakers were likely to vote to keep rates steady for now given the uncertainty ahead for Britain as it prepares to quit the EU. However, the latest figures would do little to reassure those Bank of England rate-setters who have become more concerned about higher inflation.
“If the economy continues to hold up well as we expect, interest rates could be rising rather sooner than the markets have been anticipating,” she said in a note to clients.
The increase in annual inflation from January to February was the biggest since October 2012. Economists taking part in a Reuters poll had expected inflation would rise to 2.1 per cent.
The Bank of England has said it expects inflation will peak at 2.8 per cent in the second quarter of next year, but many economists say it is likely to hit 3 per cent.
Inflation has also accelerated in the United States and elsewhere in Europe. The Office for National Statistics said transport costs, which were pushed up by rising fuel costs, were the biggest driver of inflation in February. Also, food prices rose in annual terms for the first time in more than 2½ years.
Excluding oil and other volatile components such as food, core consumer price inflation rose to 2.0 per cent, above the Reuters poll forecast of 1.8 per cent. Data on factory gate prices underscored the inflationary pressures still in the pipeline. – Reuters