UK inflation rate rises to 10.4 percent in February

London, The Gulf Observer: UK inflation unexpectedly rose to 10.4% in February, pushed up by higher food prices and pricier drinks in pubs and restaurants, official data showed on Wednesday, a day before the Bank of England announces its latest interest rate decision.

Economists polled by Reuters had forecast that the annual CPI rate would drop to 9.9% in February from January’s 10.1% and move further away from October’s 41-year high of 11.1%.

The BoE is due to announce on Thursday whether it has raised interest rates for an 11th meeting in a row.

Investors are split on whether it will pause its run of increases in borrowing costs because of the recent upheaval in the global banking sector.

“Given the market movements of late, this puts the Bank of England in an incredibly difficult position as it may not be enough for the Bank of England to press pause on the rate hikes,” Richard Carter, head of fixed interest research at Quilter Cheviot, said.

Sterling rose against the dollar and the euro after the data was published.

Interest rate futures showed a 100% chance that the BoE would raise rates by at least a quarter point, up from just over 50% late on Tuesday.

The ONS said that an end to January drinks promotions in pubs and restaurants was the biggest factor pushing up inflation last month, but shortages of salad items also played a role.

“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,” ONS chief economist Grant Fitzner said.

Higher alcoholic drink prices added 0.17 percentage points to the annual rate of inflation in February, while the increased cost of food and non-alcoholic beverages added 0.15 percentage points.