(Bloomberg) -- UK inflation rose unexpectedly, lingering in double digits for a sixth month after restaurants and retailers boosted prices.
The Consumer Prices Index rose 10.4% in February, the first increase in four months, after a 10.1% gain the month before, the Office for National Statistics said Wednesday. Economists had expected a reading of 9.9%
The figures will disappoint the Bank of England, which expects inflation to fall sharply this year toward its 2% target. The reading will feed into the debate about how many more interest rate increases it needs to push through.
Once almost certain of another hike this week, investors now have Thursday’s decision on a knife edge after turmoil in the banking industry rattled markets.
After the quickest set of rate increases in three decades, the UK central bank already was sending more neutral signals about the future direction of rates. Governor Andrew Bailey said investors shouldn’t assume more hikes are needed even before regulators stepped in to rescue Silicon Valley Bank and Credit Suisse Group AG.
Inflation peaked at 11.1% in October and is expected to drop sharply this year as comparisons with 2022, when energy prices soared, drop out of the mix. The BOE and Office for Budget Responsibility both expect CPI at 9.7% in the first quarter, with the OBR seeing inflation below target in the first quarter of 2024 and the BOE three months later.
