MNI BRIEF: No Cheer For BOE As Alcohol Costs Push CPI Higher
Rising services costs pushes UK inflation higher, giving added ammunition to hawks as BOE meets.
UK inflation surprised to the upside in February, as sharp rises in the cost of alcohol at pubs, restaurants and cafes helped push services inflation to 5.6% year-on-year. Headline inflation rose to 10.4% from 10.1% in January, confounding expectations for a decline to 9.9%, the Office for National Statistics said Wednesday.
The Bank of England is meeting Wednesday, ahead of Thursday's policy announcement, to decide whether to raise interest rates for an 11th consecutive meeting. Markets had been split on whether the Monetary Policy Committee would go for a 25 bps hike of whether to leave rates on hold at 4% in the wake of the banking crisis. The strength of the February data may just give the hawks the ammunition they need to push through a 25bps hike.
Core inflation also rose, up 1.2% m/m and up 6.2% y/y from 5.6% in January. It was the first y/y rise in core inflation in 5 months.
“Inflation ticked up in February mainly driven by rising alcohol prices in pubs and restaurants following discounting in January," Grant Fitzner, ONS chief economist said.