UK inflation accelerated to 10.4% contrary to forecasts

According to the National Statistical Office of the UK, inflation in the country accelerated to 10.4% y/y in February (from 10.1% a month earlier). Analysts note that the increase in annual inflation was due to the growth of consumer prices in February by 1.1% for the month compared with an increase of 0.8% in January.

The current acceleration in the pace of price growth turned out to be unexpected: experts predicted that the inflation index in February would drop to 9.9% and move even further away from the 41-year high of 11.1% recorded at the end of October 2022.

ONS chief economist Grant Fitzner noted that inflation accelerated in February mainly due to rising prices for alcohol in pubs and restaurants after January discounts on gin, whiskey and some beers were discontinued. This increase in the cost of alcohol added 0.17 percentage points to the annual inflation rate in February. At the same time, the share of food and soft drinks accounted for 0.15 percentage points – they rose in price by 18.2% over the year, which was the highest since 1977.

The core consumer price index (excluding energy, food, alcohol and tobacco) rose to 6.2% from 5.8% in January instead of the projected decline to 5.7%. Prices in the service sector increased by 6.6% against 6.0% a month earlier.

It is worth noting that inflation in the UK is five times higher than the Bank of England's target level of 2%. It is also higher than in all other G7 countries.