Inflation Rate in the UK Rises to Painful Levels
Inflation took a turn for the worst in February, according to the Office for National Statistics. The ONS released figures indicating the RPI, as well as the CPI, both went up from the month of January.
The RPI, or Retail Price Index rose to 5.5%. This is from a January level of 5.1%. Among other things, the RPI includes mortgage interest payments. The CPI, or Consumer Price Index, reached 4.4%, up from 4% in January. The CPI increase was driven by higher costs for food, fuel and clothing. Overall, clothing and footwear prices have increased almost 4% following January. The last time the CPI reached this level was October of 2008. The rate is high enough that it continues to place pressure on the Bank of England to raise the base rate and reign in high prices. Other factors contributing to the high inflation rate are domestic heating costs increasing, as well as financial services costs escalating. Economists are a bit stunned at the CPI reaching 4.4% in one month. Hetal Mehta, analyst at Daiwa Capital Markets, commented on the rate, saying: "This pressure will no doubt intensify as higher commodity prices feed through in the coming months, taking inflation to around five per cent." She added: "Provided that interest rates start to increase by 25 basis points (0.25 per cent) per quarter from August, in line with our expectations, then we believe inflation will average two per cent next year." The Bank of England is expected to raise the base rate within the next three months.