The Office for National Statistics (ONS) has this today released UK inflation figures for February 2022, ahead of Rishi Sunak’s Spring Statement later today.
Consumer Prices Index (CPI) has hit a 30 year high at 6.2%pa in February 2022 (5.5%pa in January, 5.4%pa in December, 5.1%pa in November and 4.2%pa in October). This is yet again its highest rate in over 30 years.
The ONS put the inflationary increases price increases down to:
On the downside, clothing and footwear prices fell back a little.
What about the old inflation measure of the Retail Prices Index (RPI)?
The old measure of inflation RPI, which is an arithmetical mean of the average prices of a basket of household spending, hit yet another 30 year high in February of 8.2%pa (up from 7.8% in January, 7.5% in December, 7.1%pa in November and 6%pa in October). The last time RPI was at these levels was in March 1991 when inflation was 8.4%pa and we are likely moving to break that record the Bank of England suggesting it could 10% without more intervention.
We repeat our message on inflation in that we still believe that RPI is a more accurate measure as it is the costs of a standard amount of a set of goods and services divided by the number of goods and services called an arithmetical mean whereas the newer measure of inflation, CPI is a geometrical mean i.e., prices multiplied together and then the nth root of the same number of goods and services.
The Bank of England’s next move? We expected another 0.25%pa interest rate increase in February, and we got it. We expect a further two or three rises by the end of 2022 and suggest rates could be back to 2.0% in 2023.