London
CNN
—
UNITED KINGDOM consumer prices jumped 10.4% in February from a year ago, as food inflation hit its highest level in more than 45 years and the cost of visiting restaurants and of hotels increased, according to official data released on Wednesday.
Food prices have soared 18.2% on the year to February, the biggest rise since the late 1970s. The Office for National Statistics noted particular increases for some salad and vegetable items, partly caused by shortages, leading to rationing by supermarkets.
The surprise rise in inflation in February follows months of deceleration since the pace of rising prices reached a 41-year high of 11.1% in October.
The latest figures could make it more likely that the Bank of England will raise interest rates again when it meets on Thursday.
Although the recent turmoil in the banking sector is expected to weaken economic activity as lending standards are tightened, thus dampening inflation, “the Bank of England may well want to see hard evidence of this before it stops raising interest rates,” said Paul Dales, chief UK economist at Capital Economics.
“It’s still very close, but these numbers give us a bit more confidence in our forecast that the Bank will raise interest rates by 4% to 4.25% tomorrow.”
But Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said rising food inflation and catering services inflation were behind the entire rise in the headline rate and that both were linked to the rise in the price of fresh food following poor harvests.
“This boost should dissipate over the next few months,” he said on Twitter. “It makes no sense to raise rates to counter a weather-related rise in food prices.”
Shortages of some UK fruit and vegetables could last into May, one of the country’s biggest food producer groups told CNN last month.
Supermarkets and the UK government have pointed to poor weather conditions in major exporting countries Spain and Morocco as the main cause of the shortages. But farmers also blamed sky-high energy costs, Brexit-related labor shortages and trade barriers.
Core inflation – which excludes food and energy price volatility – also rose, rising to 6.2% in the year to February from 5.8% in January. Yet core inflation is below the rates recorded at the end of last year.
The data not only complicates the central bank’s decision on whether to raise rates for the 11th consecutive time on Thursday. It will also be more difficult for the government to keep its promise, made in early January, to halve inflation this year. Inflation stood at 10.5% in December.
And the British are getting even poorer. Wages rose 6.5% in January from a year earlier, well below the rate of inflation both that month and in February.
