CPI Inflation Rose To 2.8% In February

In February, consumer prices increased 0.7% over the month. CPI inflation rose for the first time since October 2012 (to 2.8%). It may increase further in the coming months, and exceed the central bank’s 2% target for price stability. However, the Government may clarify its position on the BoE policy goals at the annual U.K. budget presentation, scheduled for tomorrow.

Consumer prices rose in February by 0.7% over the month. Price increases for food and soft drinks, as for alcohol were smaller than last year, but upward pressure came from rises in many gas and electricity bills (+0.5% m/m), recreation & culture (+0.5% m/m) and in transport prices (+1.2% m/m), notably in motor fuel prices.

CPI inflation, which remained unchanged for four months (at 2.7%) rose to 2.8% in February. It stood still below the upper bracket of the Bank of England’s inflation target, but moved away of the Central bank’s 2% target. According to the ONS, the largest upward pressure came also from rises in many gas and electricity bills, recreation, culture and transport prices. Conversely, core inflation remained unchanged (at 2.3%).

ONS launched two new measures of consumer price inflation for the first time this month. CPIH, which includes owner occupiers’ housing costs and RPIJ, an improved variant of the Retail Prices Index (RPI) are calculated using formulae that meet international standards. CPIH, also grew to 2.6% in February (after 2.5% in January) and RPIJ stood at 2.6%, down from 2.7% in February.

In the nine first months of 2012, inflation fell rapidly from last year's peak. But inflation, which has remained high since a few months, may increase further in the coming months in line with the rise in university tuition fees and energy. The fall in sterling stands at 5% since January. This fall is always reflected in higher import prices. Inflation will also remain well above the central bank’s 2% target. The Government may clarify its position on the Bank of England’s policy goals, and may review the inflation-target on the occasion of the annual UK budget presentation to Parliament tomorrow.

BY Catherine STEPHAN

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