The UK's Consumer Price Index rose in for the first time in four months from 2.7 per cent to 2.8 per cent for the year ending February. It now looks like the Bank of England's two per cent target will not be hit for a very long time. The Producer Price Index fell from 1.4 per cent to 1.3 per cent, although a greater fall to 1.1 per cent had been anticipated.
BNP Paribas' David Tinsley said:
Amongst the barrage of inflation measures the main news is that CPI inflation is drifting higher. Some of that is due to energy, the core inflation measure was unchanged from January, but these effects are going to stay in the index for a good while yet.
Indeed the bigger news comes from the producer prices release today. Here pipeline prices are building markedly. Input prices were up 3.2% on the month, with a 0.8% rise in output prices. Both of these rises were above market expectations. The size of the increase is largely an oil/petrol story, but there is a discernible rise in producer price inflation across product categories. This is likely to be the first signs of the impact of the weakness of sterling on prices as it passes through the supply chain.
The Centre for Economics and Business Research's Rob Habron said:
The latest movement in the headline rate takes inflation further away from the Bank of England's target of 2.0%, with notable upside risks remaining. The Bank of England's Chief Economist Spencer Dale warned earlier this month that extra quantitative easing could cause businesses to put up prices rather than expand production, fuelling inflation further. In addition, the weaker value of sterling is likely to keep inflation high by pushing up the costs of imported inputs and goods for both businesses and households.