According to the report from the Office for National Statistics (ONS), consumer prices rose by 2.8% per year in February after an increase of 3.0% per year in January (the highest level since March 2024). Economists had expected CPI growth of 2.9% per annum. On a monthly basis, the consumer price index rose 0.4%, offsetting the January decline (-0.1%), and recording the sharpest increase since October 2024. Consensus estimates suggested a 0.5% increase.
The ONS said that the largest downward contribution to the CPI annual rates came from clothing and footwear, housing and household services, and recreation and culture. Overall prices for clothing and footwear fell by 0.6% annually, compared with a rise of 1.8% per annum in January. The February figure was the first negative annual rate since October 2021. The annual inflation rate for housing and household services was 5.3% in February, down from 5.6% in January. There were no large, offsetting upward contributions. Alcohol and tobacco prices rose by 5.7% per annum in February, up from 4.9% previously.
Meanwhile, core CPI - which excludes energy, food, alcohol and tobacco - slowed to 3.5% per year from 3.7% per year in January (the highest reading since April 2024). Consensus estimates suggested an increase by 3.6% per annum. The annual CPI goods rate slowed (0.8% vs 1.0% in January) while the CPI services rate held steady (at 5.0%).
On a monthly basis, core consumer prices rose 0.4% after declining 0.4% in January. Economists had expected a 0.5% increase.
Overall, the latest data will be food for thought for the Bank of England, which left interest rates at 4.5% at its monetary policy meeting last week. The UK government will be closely monitoring inflation data as Finance Minister Rachel Reeves prepares to brief lawmakers on Wednesday on her spending and tax plans, as well as the country's economic prospects. Reeves is expected to announce billions of pounds in spending cuts as a way to close budget deficits caused by rising borrowing costs after her first fiscal plan was released last fall.