Inflation in the United Kingdom unexpectedly rose to 10.4 percent in February, pushed up by higher food prices and pricier drinks in restaurants, official data showed on Wednesday, a day before the Bank of England (BoE) announced its latest interest rate decision.
On Thursday, the BoE is due to announce whether it has raised interest rates for an 11th meeting in a row.
Investors are split on whether it will pause its run of increases in borrowing costs because of the recent upheaval in the global banking sector.
“Given the market movements of late, this puts the Bank of England in an incredibly difficult position as it may not be enough for the Bank of England to press pause on the rate hikes,” Richard Carter, head of fixed interest research at Quilter Cheviot, said.
The sterling rose against the dollar and the euro after the data was published.
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Interest rate futures showed a 100 percent chance that the BoE would raise rates by at least a quarter point, up from just over 50 percent late on Tuesday.
“Food and non-alcoholic drink prices rose to their highest rate in over 45 years with particular increases for some salad and vegetable items as high energy costs and bad weather across parts of Europe led to shortages and rationing,” ONS chief economist Grant Fitzner said.
Higher alcoholic drink prices added 0.17 percentage points to the annual rate of inflation in February, while the increased cost of food and non-alcoholic beverages added 0.15 percentage points.
Overall inflation for food and non-alcoholic drinks rose to 18.0 percent, its highest since 1977.