February 23 UK Inflation CPI Up 0.2% to 10.4% RPI Up 0.5% to 13.8%

Published / Last Updated on 22/03/2023

The Office for National Statistics (ONS) released CPI inflation figures this morning for February 2023 at 10.4% pa, up 0.2% pa from 10.2% pa in January 2023.  This was a surprise increase in inflation due to increased costs for fruit, vegetables, salad items and alcohol as pubs and clubs also increased prices.

Consumer Prices Index (CPI)

UK Consumer Prices Index (CPI) remains stubbornly double digit at 10.4% pa (February 2023) up from 10.2% pa (January 2023), 10.5% pa (December 2022)10.7% pa (November 2022) and 11.1% pa (October 2022) to). 

Wholesale fruit & vegetable prices have jumped due to shortages in supermarkets and shops as a combination of bad weather and logistics i.e., transport issues start to hurt.  This contrasts with US inflation figures published last week, down to 6.04% pa from 6.41% pa (January 2023).

Old Inflation Measure - Retail Prices Index (RPI)

The old measure of inflation RPI, an arithmetical mean of the average prices of a basket of household spending (rather than the geometric mean for CPI), also jumped for the same reasons from 13.4% pa for December 2022 and January 2023 to 13.8% pa but not quite the 41-year highs of 14.2% pa (October 2022) and 14.0% (November 2022).


What a conundrum for central banks.  The Federal Reserve (Fed) is due to announce interest rate changes today and is widely expected to increase rates by another 0.25% pa to a range of 4.50% pa and 5.0% pa.  In Europe, pressure has been on both the Bank of England (BoE) and the European Central Bank (ECB) to try and curb interest rate increases due to pressure on banks and the recent bail out of Credit Suisse, but the ECB ignored this threat and yesterday confirmed an increase in rates by 0.5% pa to 3.5% pa with effect from today.  The BoE is due to announce tomorrow, and we expect a 0.25% pa increase to take UK central bank rates up to 4.25% pa.

We have suggested many times that this period of high inflation could be around for another 5 years despite the Bank of England 6 months ago suggesting we will back on target within 2 years.  We suggest not. 

We remind you; a period of high inflation devalues fixed rate government debt (gilts) over the years meaning that when the government comes to repay its covid-19 and cost of living support debts in say 20 years time, their real-time cost is lower, just like an interest only mortgage if you are paying off the original mortgage capital amount, taken out 25 years ago.

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