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United Kingdom Inflation February 2022

United Kingdom: Inflation comes in at highest level since March 1992 in February

Consumer prices rose 0.81% in February over the previous month, swinging from the 0.13% drop seen in January. February’s figure marked the highest reading since October 2021. The rebound was driven by rising prices for recreation and culture and transportation.

Inflation increased to 6.2% in February from January’s 5.5%. February’s reading marked the highest inflation rate since March 1992. Annual average inflation rose to 3.5% in February (January: 3.0%). Lastly, core inflation rose to 5.2% in February, from the previous month’s 4.4%.

Inflation is expected to rise notably further in the coming months. The energy regulator Ofgem will raise the energy price cap substantially from 1 April, while soaring oil and agricultural prices due to the war in Ukraine will also push up inflationary pressures. That said, this should be slightly tempered by the appreciation of the pound, and the cut in fuel duty announced in the Chancellor’s Spring Statement.

On the outlook, James Smith, developed markets economist at ING, said:

“UK inflation is set to peak a little above 8% in April as higher petrol prices combine with the dramatic increase in the electricity/gas price cap. The situation later this year is looking less worrisome than it was a few weeks ago given the pullback in gas prices, but inflation is still likely to end the year above 6%.”

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