Energy costs push up inflation
Consumer price inflation showed a 0.3 per cent increase last month, rising to 2.5 per cent.
The hike was blamed on soaring energy costs, with petrol, diesel, electricity and gas all recording rises.
However, the Office for National Statistics (ONS) said that the scale of the increase was due in part to a new method of calculating inflation.
Rather than phasing in increases over a four-month period, last month the ONS included gas and electricity rises from the day they were introduced. As a result, the February figures reflected all of this year’s energy cost increases.
Had the change not been made, the ONS said that the rate of CPI inflation would have held at 2.2 per cent.
Core rate inflation, which does not take food or energy prices into account, actually dipped last month to 1.2 per cent.
This has encouraged businesses to call for an urgent cut in interest rates as a way of stimulating a slowing economy.
David Kern, economic adviser to the British Chambers of Commerce, said: “The underlying picture is unchanged, and it remains highly likely that after rising a little further in the next few months, CPI inflation will fall rapidly later in the year. It is significant that core CPI inflation (excluding food, energy and tobacco) has fallen further to 1.2 per cent, compared with 1.5 per cent last autumn.”
Mr Kern added: “While the MPC cannot be complacent about the rise in headline inflation, the deepening global financial crisis must be given a higher priority at present. Undue delay in cutting interest rates will entail serious risks for the economy. We strongly urge the MPC to cut interest rates in April.”
