UK Inflation Holds Steady at 3.0% in February, Core Inflation Rises
The UK’s annual inflation rate remained at 3.0% in February, matching January’s figure, according to data released by the Office for National Statistics (ONS). However, core inflation, which excludes volatile energy and food prices, edged up to 3.2% [ONS]. This increase signals persistent underlying inflationary pressures within the UK economy.
Core and Commodity Inflation Trends
Commodity inflation accelerated, rising by 0.5 percentage points to an annual rate of 1.3%, driven primarily by increases in the prices of durable and semi-durable goods. Conversely, service sector inflation slowed slightly, decreasing by 0.1 percentage points to 4.3%. Within the service sector, transportation services saw a reacceleration of 0.4 percentage points, reaching 6.3% due to higher-than-anticipated railway fare increases and maintenance costs [ONS].
Food, alcohol, and tobacco inflation decreased by 0.4 percentage points to 3.4%, falling below Barclays’ forecast of 3.6%.
Producer Price Inflation and Expectations
Producer input price inflation increased by 0.9 percentage points to 0.5%, while output price inflation decreased by 0.8 percentage points to 1.7%. A slowdown in domestic food input price growth, down 0.9 percentage points to 0.4%, suggests potential easing of food inflation in the coming months, independent of recent energy price changes [ONS].
Inflation expectations, as measured by the Citi/YouGov March series, have risen sharply. Expectations for the next year increased by 2.1 percentage points to 5.4%, the highest level since 2023. Long-term inflation expectations similarly rose, increasing by 0.9 percentage points to 4.5%, exceeding the peak of 4.3% recorded in June 2025.
Retail Price Index and Market Reaction
The retail price index (RPI) in February was 408.2, with a monthly growth rate of 0.44% and an annual growth rate of 3.60%, approximately 5 points lower than Barclays had forecast. Barclays noted that the February data may have limited predictive value, given anticipated increases in energy prices and ongoing uncertainty in the Middle East.
Bank of England and ONS Collaboration
The Bank of England regularly gathers and analyzes financial data to inform its policy decisions and supervise financial firms [Bank of England]. The ONS is the UK’s largest independent producer of official statistics and works with bodies in Northern Ireland and Scotland to coordinate data collection [ONS]. Recently, an exchange of letters between the Bank of England and the ONS facilitated exceptional pre-release access to labor market statistics [ONS].
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