Despite many forecasters suggesting that inflation would duck back into single digits in February, the cost of living rose more than expected as salad and vegetable shortages helped push up food prices at the fastest rate in 45 years – by Hannah Barnaby


Those looking to drown their sorrows at the news that inflation had jumped by 0.3% to 10.4% in February, would have encountered equally bad news as alcohol prices in restaurants and pubs also drove up costs.

Clothing costs, particularly for children and women, rose last month but fuel prices continued to fall, despite concerns that reductions in wholesale prices have yet to be fully reflected at the pumps. 

With the figures reflecting yet more bad news for squeezed families, the Bank of England will decide tomorrow whether to increase interest rates again as it continues its battle to curb inflation. 

It has hiked interest rates 10 times since December 2021 to make borrowing money more expensive and encourage people to spend less and stop prices from rising so quickly. 

Many economists had been expecting the central bank to hold rates at 4% following recent concerns over the stability of the banking sector; however, this unexpected rise in inflation has led many to predict a further rise to 4.25%. 

The Office for National Statistics (ONS)said the continued rise in food costs had been a big factor in February’s inflation figure; supermarkets experienced shortages of tomatoes, peppers and cucumbers as extreme weather in Spain and North Africa impacted harvests, and high energy prices hit growers in the UK.  

Along with higher prices for milk, olive oil and eggs, the ONS said the shortages helped push food inflation to 18.2% – the highest since 1978; problems with supply chains also contributed to the problem, and TV footage of empty shelves in the UK was contrasted with seemingly bountiful supplies across Europe, suggesting that the Brexit factor had played a part. 

‘Core inflation’ – which strips out more volatile items such as food, energy, alcohol and tobacco – also unexpectedly rose jumping from 5.8% to 6.2%. 

ONS Chief Economist, Grant Fitzner called the shock rise ‘depressing’, but said that the longer-term outlook was ‘not quite as bleak’, and that inflation was set to fall this summer as energy prices come down. 

Inflation in the UK is higher than in most major developed economies, and despite his government’s pledge to halve it, Chancellor Jeremy Hunt said slower price rises were ‘not inevitable’. 

In response to the news, here are some thoughts from industry experts: 

George Lagarias, Chief Economist at Mazars comments: ‘UK inflation surprisingly accelerated. This was mostly due to higher energy and food costs, not discretionary consumption. This confirms our earlier view that the recent OBR year-end 2.9% inflation projections may have been on the optimistic side. 

‘On the one hand, the number confirms that the economy is not slowing down as much as originally expected. On the other, the CPI figure paints a grim picture for consumers who are facing more difficulties meeting everyday expenses. 

‘Inflation above 10% could pull wages higher, increasing costs for businesses. 

‘Consumer prices remain uncomfortably high, putting additional pressure on the Bank of England which, like other central banks, has to decide between fostering financial stability and persisting on its fight against inflation.’ 

Andrew Megson, CEO of My Pension Expert, said: ‘Today’s data will come as a cruel blow to consumers. After signs that inflation was on a steady decline, this sudden jump back up will trigger fresh fears and challenges as people try to manage their finances and plan for the future. This is certainly true of those in or approaching retirement.  

‘In many cases, the sky-high cost of living means retirees’ savings will not sustain the lifestyle they had planned, or at least not for as long as they intended. The result is that many older workers are feeling forced to abandon their plans to exit the workforce – a massive 44% of over-55s currently in work believe the cost-of-living crisis has rendered retirement impossible, My Pension Expert’s recent research revealed. 

‘In his Budget last week, the Chancellor enacted policy geared towards bringing over-50s back into work or keeping them there. Double-digit inflation will do that job for Jeremy Hunt. So, it’s vital that the Government works closely with regulatory bodies to allow people to first come to their own decisions. This includes ensuring Britons know where to access independent financial advice, which will mean they can better understand their financial situation and make any necessary adjustments to financial strategies to keep retirement plans on track as inflation remains high.’ 

Julia Turney, Partner and Head of Platform & Benefits, Barnett Waddingham comments: 

‘Inflation has yet to dip below double digits, and the cost-of-living battle continues. Our recent research shows that a large proportion of businesses (42%) are offering no specific support to keep up with the cost-of-living crisis, despite the ongoing inflationary pressures their employees are facing. 

‘While last weeks’ budget may have given some respite for those with childcare needs, businesses still must provide targeted benefits and wider support that will ease the financial burden for employees. Money worries can have an overwhelming impact upon workers’ mental, physical, and financial wellbeing in the workplace, impacting their overall productivity. It should be in a business’s best interest to prioritise employee financial wellbeing, not only during periods of economic crisis, but consistently and regularly.’ 


We also include some thoughts following the latest ONS Housing Affordability figures: 

Steve Griffiths, Chief Commercial Officer at The Mortgage Lender (TML), comments: “House prices are showing signs of defying market slowdown expectations, and with rising living costs, high inflation and interest rates, the affordability gap is widening to a chasm for many. In fact, our own research found that not being able to afford to get onto the property ladder was a top concern among 30% of renters. 

“Specialist lenders can play an important role here in supporting consumers with their property aspirations. Going beyond just supporting those with blips in their credit scores, they can be instrumental in casting a wider net when it comes to assessing affordability. And with an expected 1.4 million households due to renew their fixed-rate mortgage this year, they have a real opportunity to help borrowers in their property ambitions.” 

Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: ‘Official figures show that house price inflation lost a considerable amount of momentum in January, when the reverberations from the ill-fated mini-Budget on the mortgage marketplace was still being felt. 

‘Things have moved on since then, and more up-to-date house price indices paint a distorted picture of a very uneven market. Property portal Rightmove said asking prices for homes rose by a monthly 0.8% in March after the weakest February in records going back to 2001 when they flat lined. Nationwide also reported a significant dip in houses in February – the biggest annual fall in house prices in over a decade – whearas Halifax reported a 2.1% increase in the annual rate of house price growth. 

‘The reality is there is a collection of micro-markets at play. There are still regions where gazumping and bidding wars are rife, and the opposite is true in other parts of the nation. Estate agents have reported that a lack of supply in larger property have kept prices inflated, as the race for space theme continues to play out. 

‘The recent fall in mortgage rates, with lenders seemingly engaged in a mortgage price war, and a strong labour market, with unemployment at a near record low, has helped keep prices elevated. But the affordability crunch from rampant inflation and high mortgage rates, which in some cases are more than double than what they were this time last year, has lessened demand. 

‘Spring, typically a busy season for the UK’s property market, will provide the real acid test for the robustness of house prices.’ 




‘While house price inflation has continued to lose momentum, rents have moved in the opposite direction – rising by 4.7% in the 12 months to February – the largest annual percentage change since records began back in 2016. Renters are increasing feeling the brunt of tougher refinancing conditions, with many landlords opting to pass on the higher mortgage costs onto tenants. 

‘Fast rising rent is a growing blocker for many would-be homeowners, curtailing deposit-building efforts.’ 




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