KPMG comments on today’s inflation figures

Surprise increase in inflation complicates Bank of England's task” says Yael Selfin, Chief Economist at KPMG UK.

Surprise increase in inflation complicates Bank of England's task” says Yael Selfin.

“Inflationary pressures are proving more persistent as an acceleration in core inflation, which excludes the effect of food and energy, helped push the headline rate in February. The Bank of England may therefore choose to raise base rates tomorrow, but this may still be the last increase in this tightening cycle.

“Nevertheless, we still expect to see falls in inflation throughout the rest of the year, and the recent drop in wholesale prices of natural gas could bring the headline rate back to the Bank’s 2% target by early 2024, potentially falling below target later that year.

“In the near term, the extension of the Energy Price Guarantee at its current level of £2,500 per month is to subtract a further 1 percentage point from the headline rate of inflation from April onwards, compared to the level it would have been had it been increased to £3,000 as originally planned.

“Inflation in February rose for the first time since October last year, to 10.4%, driven price rises in foods, clothing and eating out.”

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