Wednesday 20 March 2019 9:44 am

Inflation edges up from two-year low as food and alcohol prices rise

Reporter at City A.M. covering banking, markets and insurance

Reporter at City A.M. covering banking, markets and insurance

Follow Callum
The UK inflation rate edged up from two-year lows last month as food and alcohol prices rose.

The Consumer Price Index (CPI) 12-month rate was 1.9 per cent in February, up from 1.8 per cent in January, according to the Office for National Statistics (ONS).

Read more: UK inflation falls close to a two-year low

Rising food, alcohol and tobacco prices pushed inflation upward, but was offset by clothing and footwear – the largest downward contributors.

"Inflation holding relatively steady, the highest levels of employment since 1971, and wages increasing at their fastest pace in over a decade gives a rosy shine to the UK's economic position," Zurich's head of retail platform strategy, Alistair Wilson, said.

But he said the welcome boost for households may be "short-lived" with Brexit uncertainty making the future movements of inflation unpredictable.

With the Bank of England's monetary policy committee (MPC) set to make a decision on interest rates tomorrow, EY Item Club economist Howard Archer said it was clear the committee would "sit tight."

He said: "Indeed there is a very real possibility the Bank of England will keep interest rates at the current level of 0.75 per cent through 2019."

Read more: Inflation remains steady in October, ONS data shows

He said with CPI below the two per cent target rate and a "muted" economy despite earnings growth and a tight labour market, the Bank had scope to adopt a "wait and see" approach on monetary policy.

Ruth Gregory, economist at Capital Economics, said inflation looked set to rise further over the next couple of months given a planned rise in the utility price cap in April and price pressures in the supply chain.