Inflation rates see an unexpected jump to 10.4%

The latest figures from the Office for National Statistics (ONS) revealed an unexpected rise in the consumer prices index (CPI). According to the new figures, CPI rose to 10.4% last month, up from 10.1% in January.  

As if this wasn’t bad enough for those already trying to manage the rising cost of living, ONS revealed that food prices have seen yet another surge. The cost of food and non-alcoholic beverages has risen by 18% in the year to February, the highest increase within the same timeframe since 1977 (ONS: March 2023).   

With the pressure increasing for aggressive action, The Bank of England responded to these figures on Thursday by raising interest rates a further quarter point from 4% to 4.25%. This marks the 11th consecutive base rate rise. For many, especially those trying to manage their increased mortgage payments, the squeeze is far from over. 

With rates rising 4.15% since December 2021, we are witnessing the most aggressive tightening of UK monetary policy in decades (CNBC: March 2023).   

Inflation in the UK 

Inflation is a measure of how the prices of goods and services have increased over time. Goods are tangible items sold to customers, such as food, while services are tasks performed for the benefit of recipients, such as a haircut. Generally, this increase is measured by considering the cost of things today compared to how much they cost a year ago. The average increase between these prices is demonstrated in the inflation rate.  

Rising inflation rates directly affects the cost of living. For example, if the price of a bottle milk is £1, and inflation is increasing by 5%, then your bottle of milk will cost you 5p more. Or, in other words, the spending power of your money has decreases by 5% (Bank of England: March, 2023). 

Ideally, the Government wants to keep inflation low and stable. The general mandated target for the Bank of England is 2% (Bank of England: March, 2023). Anything significantly above or below this target is thought to cause issues for the economy.

An unexpected rise 

Inflation had been falling steadily since October 2022 where it was 11.1% and had fallen to 10.1% in January. The jump to 10.4% came as a shock to analysts, who had estimated that inflation would continue to fall to 9.9% in February, due primarily to the decreased cost of raw materials on the global market and reducing gas and oil prices.  

It is also thought that the rise in the cost of drinks, meals out and fresh food all contributed to the surprising figure, with The Resolution Foundation think-tank saying hospitality and food costs were driving price rises, meaning that “lower-income families are facing the greatest price pressures of all, with an effective inflation rate above 12%” (The Guardian: March 2023). 

Unsurprisingly, it is lower-income families that will struggle the most from this latest squeeze.

With the cost of living crisis continuing to rise, it’s more important than ever to make sure your finances are handled responsibly and with the right guidance. We at The Private Office understand the stress surrounding the current economic climate and want to do everything we can to help you make the right financial decisions in these uncertain times.

If you’d like to know more, request a free non-committal initial consultation with one of our team or give us a call on 0333 323 9065 and get in touch.

Arrange your free initial consultation