CPI inflation recorded an annual rise of 6.2% in February 2022 – the highest since March 1992’s growth of 7.1%.
The latest figures from the ONS show that on a monthly basis, CPI rose by 0.8% in February, compared with a rise of 0.1% in February 2021. This was the largest monthly CPI increase between January and February since 2009.
CPIH inflation, which includes owner occupiers’ housing costs, rose by 5.5% in the 12 months to February, up from 4.9% in the 12 months to January.
Recreation and culture, clothing, furniture and household goods and food and drink were among the categories seeing the highest price rises.
Derrick Dunne, CEO of YOU Asset Management, commented: “UK inflation continued its climb in February, with the 12-month CPI reading hitting a fresh high of 6.2%.
“Way ahead of expectations, the 0.7% increase we see today is a hefty uplift, and further intensifies the pressure for The Bank of England, who just last week revised its forecast for inflation to peak at 7.7% during the second quarter – almost quadruple its 2% target. An additional hike to the base rate is now looking increasingly likely come May, but the Bank must play a careful balancing act to avoid exacerbating the cost-of-living crisis which is already raging across the UK.
“Against this backdrop it’s rumoured that the Chancellor will today announce new measures – including cuts to fuel duty – to help those hit the hardest by surging household costs. Exactly what will come of the Spring Statement remains to be seen, but what we do know is that the spectre of inflation will hang over us for many months yet. For savers and investors, having an appropriately diversified portfolio – with investments able to perform in an inflationary environment – will be the best precautionary measure they can take right now.”
Steven Cameron, pensions director at Aegon, said: “As feared, the rate of inflation rose sharply in February and is now sitting at 6.2% and forecasted to increase to 8% or above by the year end. Those on fixed incomes will have seen their purchasing power fall by 6.2% over the last 12 months which is particularly worrying for those just getting by.
“The Chancellor’s Spring Statement (later today) has turned into a cost of living ‘not so mini’ Budget, although the longer term financial and economic costs of the pandemic as well as the war in Ukraine pose unprecedented challenges too. This leaves Rishi Sunak with a difficult balancing act when facing calls for temporary or targeted support for those in greatest need.
“With the cost-of-living squeeze on the rise, individuals will face a further hit to their take-home pay from the planned 1.25% National Insurance increase in just a few weeks. And for state pensioners, the 3.1% increase in April is exactly half current inflation, leaving them one step forward but two steps back, undoubtedly leaving many severely stretched.
“It’s clear that lower income households and pensioners are disproportionately affected by inflation rates higher than seen for 30 years. That’s why it’s crucial that in future, as planned, inflation data is refined to show the effect on different household categories.”
Antonia Medlicott, finance editor at comparison website, InvestingReviews, added: “It’s official. Inflation has got the UK economy in a headlock.
“Arguably the most worrying part of this report is that there were “no large offsetting downward contributions” to inflation. The cost of everything is moving in one direction, namely up.
“The Bank of England and Government are now well beyond red alert.
“Expect more rate rises in the months ahead as the inflationary storm grows. However, whether incremental rate rises have the ability to contain spiralling inflation is open to debate.
“Savers and real returns are in two entirely different dimensions. They’re now little more than a pipe dream for anyone holding their money in cash.”
Rozi Jones (Financial Reporter)