The cost of living increased more than anticipated last month as salad and vegetable shortages contributed to the fastest increase in food prices in 45 years.
Inflation rose to 10.4% in February, up from 10.2% in January, as the price of alcoholic beverages in restaurants and pubs pushed up household expenditures.
Last month, clothing prices increased, particularly for children and women, while fuel prices continued to fall.
The unexpected figures are released before Thursday’s interest rate decision.
As it continues to combat inflation, the Bank of England will decide whether to raise, lower, or maintain interest rates.
Since December 2021, the government has raised interest rates ten times in a succession in an effort to make borrowing money more expensive and encourage people to spend less, thereby slowing the rate of price inflation.
The Office for National Statistics (ONS) monitors the price of hundreds of commonplace items in order to calculate inflation, which measures how prices change over time.
Prior to February, inflation had declined for three consecutive months. However, the ONS reported that the sustained increase in food prices had contributed to the increase, at a time when supermarkets were experiencing shortages of certain salad items and vegetables.
Tomatoes, peppers, and cucumbers were among the vegetables impacted by adverse weather conditions in Spain and North Africa, as well as high electricity costs in the United Kingdom. Supply chain issues also contributed to the dilemma.
Along with higher prices for milk, olive oil, and eggs, it contributed to food price inflation reaching 18.2% in February, the highest level in 45 years.
The agency added that so-called core inflation – which excludes commodities such as food, energy, alcohol, and tobacco – also increased from 5.8% to 6.2% last month, indicating that other factors are causing the increase.
Despite the “dismal” numbers, ONS chief economist Grant Fitzner told that the long-term outlook was “not quite as bleak.”
He predicted that inflation in the United Kingdom would decline this summer due to falling energy prices.
The inflation figures are an unwelcome surprise for the markets, forecasters, the Bank of England, and government officials who had hoped for a straightforward path to their stated goal of halving inflation by the end of the year.
Inflation in the United Kingdom will be the highest among the G7 in February, leaving us as the only country with double-digit rates.
But this will not come as a surprise to consumers who have been on the receiving end of persistently rising food prices and recent vegetable shortages.
Inflation will continue to decline, as it is mathematically required to do so, as the largest single component over the past few years, domestic energy expenses, will increase by a smaller amount than in 2022. However, the journey promises to be rougher than anticipated.
This will complicate matters for the Bank of England, which will deliberate on Thursday whether to increase interest rates. The Bank and its counterpart in the United States, the Federal Reserve, will balance concerns about persistent inflation with concerns about global financial stability. This balancing act has become more challenging.
The Chancellor of the United Kingdom, Jeremy Hunt, stated that declining inflation rates were “not inevitable.”
As we work toward bringing inflation under control, we will provide cost-of-living assistance averaging $3,300 per household this year to assist struggling families.
However, Labour’s Shadow Chancellor Rachel Reeves stated that “nothing” in the UK economy was functioning better than it did prior to the Conservatives’ 13-year rule.
In light of recent concerns about the stability of the banking system, economists expected the Bank of England to maintain rates on Thursday. However, many believe it will increase them from the current 4%.
Russ Mould, investment director at AJ Bell, described the inflation rate for February as “pretty much the worst possible news” for Bank of England officials.
“The Bank has two primary responsibilities: maintaining financial stability and containing inflation. After a crisis in the banking sector that had unsettling echoes of events 15 years ago, the Fed may have contemplated a rate pause in order to meet the first objective.
“However, the continuing rise in consumer prices means that the government can ill-afford any sort of respite, unless it concludes that the rise in inflation is solely attributable to the February salad and vegetable shortage.”
