UK Inflation Rises to 10.4% as Food Prices Soar

UK consumer prices leapt by 10.4% in February compared with a year ago, as food inflation skyrocketed to its highest level in almost 50 years. The price of a basket of food soared 18.2% from the beginning of the year to February, the steepest climb since the mid-1970s. 

The spike in February’s inflation number comes after months of deceleration. The latest figures increase the likelihood that the Bank of England (BOE) will hike interest rates again when it meets this week.

Most market watchers expect the BOE to hike interest rates from 4% to 4.25% this week, despite ongoing trouble in the banking sector that could cool economic activity by tightening lending rules. However, analysts believe the BOE will want to see concrete evidence of that before it puts the brakes on raising interest rates. 

UK supermarkets have blamed poor weather conditions in key import markets, such as Spain and Morocco, as the reason for fresh vegetable shortages that are contributing to elevatedprices. Farmers have also bemoaned high energy costs and Brexit-related labor shortages.

Core inflation – which removes volatile food and energy costs – also rose, coming in at 6.2% in the year to February, up from 5.8% in January. To add to the gloom, Britons are getting poorer. Wages rose 6.5% in January compared with a year prior, far below the inflation rate both that month and in February.