Cost-of-living crisis shock as inflation RISES to 10.4%, defying experts predictions and driven by soaring cost of alcohol in pubs and restaurants – with food and drink prices jumping to their highest rate in 46 years
The inflation rate in Britain has risen for the first time in four months – an increase that piles pressure on the Bank of England to raise interest rates tomorrow.
Analysts were left surprised this morning after the rate of Consumer Prices Index (CPI) inflation rose to 10.4 per cent in February from 10.1 per cent in January.
The Office for National Statistics said this was mainly driven by rising alcohol prices in pubs and restaurants, while high energy prices continued to have an impact.
Most economists were expecting CPI to fall to 9.9 per cent in February, but the rise highlights the continued squeeze on household budgets across the country.
Food and non-alcoholic drinks prices rose by 18.2 per cent in the year to February , up from 16.8 per cent in January – with the annual rate now at is highest since 1977.
Shortages of vegetables such as tomatoes and peppers in recent weeks – which saw rationing in some supermarkets – were largely behind the rocketing food inflation.
Chancellor Jeremy Hunt said: ‘Falling inflation isn’t inevitable, so we need to stick to our plan to halve it this year.
‘We recognise just how tough things are for families across the country, so as we work towards getting inflation under control we will help families with cost-of-living support worth £3,300 on average per household this year.’
ONS chief economist Grant Fitzner said: ‘Inflation ticked up in February, mainly driven by rising alcohol prices in pubs and restaurants following discounting in January.
‘Food and non-alcoholic drink prices rose to their highest rate in over 45 years with particular increases for some salad and vegetable items as high energy costs and bad weather across parts of Europe led to shortages and rationing.
‘These were partially offset by falls in the cost of motor fuel, where the annual inflation rate has eased for seven consecutive months.’
While economists expect prices to drop rapidly later this year, inflation remains more than five times higher than the Bank of England’s 2 per cent target.
The central bank will weigh the need to control inflation against concerns about the fallout from global banking troubles when it decides whether to raise interest rates tomorrow.
The bank has approved ten consecutive rate increases since December 2021, pushing its key bank rate to 4 per cent.
Shadow chancellor Rachel Reeves said: ‘The reality is that under this Tory Government, families are feeling worse off and nothing is working better than it did 13 years ago.
‘The cost-of-living crisis is still biting hard and taxes are rising, yet the Government chose to use the Budget to hand a £1billion bung to the top 1 per cent.
‘Labour will stand with working people and with our mission to secure the highest sustained growth in the G7, make families across every part of our country feel better off.’
Alpesh Paleja, the Confederation of British Industry’s lead economist, said that ‘while inflation rose in February, the outlook for the months ahead is looking more benign’.
‘But while we expect inflation to fall back over this year, the firmness in domestic price pressures is something that the Bank of England will be keeping a close eye on.
‘And despite further falls over the coming months, this year will still be a high-inflation environment for both households and businesses.’