Inflation up to 2.3% as impact of food and fuel price rises felt
has risen to 2.3% as long-anticipated hikes in food and fuel prices finally hit home.
The Office for National Statistics (ONS) said the Consumer Price Index (CPI) measure of inflation reached 2.3% last month, up from 1.8% in January.
The move is the first above-target rise since November 2013 and will put pressure on the Bank’s Monetary Policy Committee to increase interest rates beyond 0.25% this year.
Ulster Bank chief economist Richard Ramsey said the increase was “significant”. And he said the rising costs of nearly all consumer goods, from cars to newspapers, was the driver.
He added: “We have also seen big rises in transport costs, with motor fuel up almost 20% over the last 12 months, and transport insurance up close to 10% in the same period. Energy costs in some areas are also on the rise, most notably liquid fuels, such as home heating oil, which is up over 60%.”
And he said the jump in cost of liquid fuels was felt particularly acutely in Northern Ireland, where a higher proportion of households heat their homes with oil.
Electricity and gas costs had been lower last month than in February 2016 — but Mr Ramsey said gas prices were to go up, with both Airtricity and Firmus announcing tariff increases here.
He added that food price inflation was relatively weak at 0.3%, but that the growth followed a prolonged period of falling food prices. And overall, the rise in inflation was likely to lead to peoINFLATION ple demading an increase in pay.
“What is for sure is that worker pay demands, which have been relatively subdued in recent years, will intensify as the purchasing power of their pay-packets gets eroded. To coin a phrase from the fashion world, the consumer sweet spot is so last year,” he said.
ONS’s Jonathan Athow said: “Inflation has risen to its highest rate for almost three-and-a-half years, with price increases seen across a range of items, but with food and fuel having the largest impact.”
The supermarket price war had kept a lid on price rises, but food is now becoming more expensive as producers begin to pass down soaring import costs triggered by the pound’s slump since the EU referendum result.
Danske Bank economist Conor Lambe does not believe an interest rate increase would result from the rise in inflation.
“Interest rates are expected to remain low in an attempt to continue supporting economic growth, particularly with the Government now on the verge of triggering Article 50,” he said.