UK inflation held at 3% in the year to February, before the start of the conflict in the Middle East, which has sent energy costs soaring and led to concerns of a resurgence in pricing pressures.
The latest consumer price index (CPI) reading from the Office for National Statistics (ONS), released on Wednesday, was in line with consensus expectations. This came after inflation fell to 3% in January from 3.4% in December.
The ONS said that clothing made the largest upward contribution to the monthly change in inflation in February, while motor fuels was the biggest downward contributor.
Read more: Multiple Bank of England interest rate rises expected after energy price surge
The data covered the period before the start of the conflict between the US, Israel and Iran on 28 February. The conflict has disrupted oil (BZ=F, CL=F) and gas (NG=F) supply, sending prices soaring, with concerns that a prolonged energy price shock could push inflation back up.
Grant Fitzner, chief economist at the ONS, said: “The largest upwards driver was the price of clothing, which rose this month but fell a year ago.”
“This was offset by falls in petrol costs, with prices collected before the start of the conflict in the Middle East and subsequent rise in crude oil prices.”
The Bank of England (BoE) warned last week that inflation will be higher in the “near term” due to the shock from higher energy prices, as it announced it had kept interest rates on hold at 3.75%.
Commenting on February’s inflation figures, chancellor Rachel Reeves said: “In an uncertain world we have the right economic plan, taking a responsive and responsible approach to supporting working people in the national interest.”
“We’re taking £150 off energy bills and providing targeted support for those facing higher heating oil costs. We’re also acting to protect people from unfair price rises if they occur, bring down food prices at the till, and cut red tape to boost long-term energy security — building a stronger, more secure economy.”
Ruth Gregory, deputy chief UK economist at Capital Economics, said: “The economy entered the energy price shock caused by the conflict in the Middle East with CPI inflation stuck at 3.0%.”
“And based on our current working assumptions about oil and gas prices, we now think CPI inflation could rise to a peak of about 4.6% in Q4.”
“With the energy price shock likely to extinguish growth and add to the already elevated unemployment rate, in our baseline scenario we still think an extended interest rate pause is more likely than interest rate hikes,” she said.