UK consumer price inflation rose unexpectedly to 10.4 percent in February, boosted by higher prices for drinks in pubs and restaurants, official data showed on Wednesday, a day before the Bank of England is due to announce a new 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 announce whether it is raising interest rates again, which would be the 11th time in a row.
Investors are divided over whether the central bank 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.
Britain’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, which excludes energy, food, alcohol, and tobacco prices, rose to 6.2 from 5.8 percent in January, while experts had forecast it to fall to 5.7 percent. The yearly inflation rate in the services sector, considered a good measure of underlying price pressures in the economy by most policymakers, increased to 6.6 percent, up from 6 percent 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.”