UK inflation remained steady at 3% in February as food prices eased, providing consumers with some respite amid the cost-of-living crisis.
Although this data covers the period before the US and Israel attacked Iran, it does provide insight into the underlying drivers of inflation that could persist in the months ahead.
“UK inflation held at 3% in February, pointing to some stabilisation in headline prices, but underlying pressures remain,” said Lale Akoner, global market analyst at eToro.
“Core and services inflation both came in slightly above expectations, suggesting domestic price dynamics are still sticky. While easing food and transport costs offered some relief to households, the broader cost-of-living squeeze persists, especially with energy prices now rising again.”
Steady food prices in February will have been welcomed, but they have no bearing on what comes next for interest rates and the Bank of England, which now has a dramatically different backdrop to assess after oil surged above $100 due to the war in the Middle East.
“It’s a tricky one for the Bank of England or markets to read this inflation print. Global markets have shifted significantly in recent weeks due to the Iran war, with today’s announcement yet to reflect the full impact of the conflict on the wider economy,” said Neil Wilson, Investor Content Strategist at Saxo.
“Markets will have paid closer attention to the worrying PMI reports from this week that showed the steepest rise in input costs for firms since 2022; combined with growth stalling. Despite the market reacting aggressively to reprice front end rates, the BoE won’t be hiking into a temporary inflation spike.”