UK inflation rate unexpectedly rises to 10.4% – what it means for your money
THE UK’s rate of inflation has risen to 10.4% in February, in another blow to households
The rate is up from 10.1% in January, according to the Office for National Statistics (ONS).
This ended up being higher than the 9.9% that was predicted by the Bank of England and economists polled by Reuters.
Food and alcoholic beverages were the biggest driver of inflation, rising by 18% - the highest rate since 1977.
Inflation had been steadily falling for the three months prior to February.
It meant prices were still rising but at a slower rate, easing some of the pressure on household budgets.
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ONS chief economist Grant Fitzner said: “Inflation ticked up in February, mainly driven by rising alcohol prices in pubs and restaurants following discounting in January.
“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.
“These were partially offset by falls in the cost of motor fuel, where the annual inflation rate has eased for seven consecutive months.”
Inflation is a measure of how much prices of goods and services change over a set period of time.
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This includes everything from food to televisions, and haircuts to train tickets.
The rise comes as the Bank of England is expected to announce its latest decision on interest rates tomorrow (March 23).
The BoE has been hiking interest rates in a bid to tackle soaring inflation.
Increasing interest rates makes borrowing on home loans and credit cards more expensive, but it is meant to bring down inflation by encouraging people to save rather than spend.
The Office for Budget Responsibility expects inflation to drop to 2.9% by the end of the year.
Chancellor Jeremy Hunt said: “Falling inflation isn’t inevitable, so we need to stick to our plan to halve it this year.
"We recognise just how tough things are for families across the country, so as we work towards getting inflation under control we will help families with cost of living support worth £3,300 on average per household this year."
What does it mean for my money?
Alice Haine, personal finance analyst at BestInvest, said: "Rising inflation delivers a fresh blow to households that were hoping the financial squeeze was finally starting to ease."
"It means disposable incomes are still very much under threat when you consider the additional challenges posed by higher mortgage costs, falling real incomes, looming tax rises and the prospect that the Bank of England may hike interest rates for the eleventh time in a row tomorrow."
However, she added that a rise in inflation coupled with the recent turmoil in the banking sector is raising a "fresh set of challenges for the Bank of England".
It must now decide whether to push ahead with a widely expected increase from the current rate of 4% to 4.25% - or pause hikes until the banking turbulence passes, she said.
"If the decision is to pause, this could mean inflation stays high for longer as workers benefit from end of tax year pay rises and, for the lucky ones, bonuses too."
Ellie Henderson, an economist for Investec, said: “When deciding the appropriate level of the bank rate, the MPC will have to assess which is the lesser of two evils: the risk of inflation being higher for longer or the current threat to financial stability stemming from the rapidly evolving fears of a banking crisis.”
Rising inflation means that consumers will get less bang for their buck.
Falling inflation indicates that the cost of goods and services are still rising but at a slower rate. Prices are still higher than they were.
The move will make the cost of borrowing, including loans, credit cards and mortgage repayments more expensive.
Although it's good news for savers as they may get better rates on their nest egg.
What is inflation?
Inflation is a measure of how much goods and services are worth in a given period.
This means how much the price of goods, such as food or televisions, and services, such as haircuts or train tickets, has changed over time.
It is known as a "backward looking measure", which means it indicates what has happened over the past year.
That obviously means it does not predict the future.
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The rate of inflation is published each month by the
It's a non-ministerial department which reports directly to Parliament.
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