Inflation Holds but Do Not Be Fooled It is Coming
Published / Last Updated on 25/03/2026
Overview - UK Inflation Update – February 2026
- The ONS has released the UK inflation figures for February 2026.
- CPI remains at 3.0%, while RPI has eased from 3.8% → 3.6%.
- These figures do not reflect the impact of the recent Middle East conflict.
Key Timeline
- 18 Feb 2026: CPI fell to 3.0%, raising expectations of a Bank of England rate cut on 19 March.
- 28 Feb 2026: USA and Israel launched attacks on Iran.
- Post‑attack: Oil prices surged, reversing expectations for falling inflation.
Why the Current Figures Are Misleading
- February’s data was collected before the military action.
- Fuel and energy prices have risen sharply since, meaning inflation will likely rise in the coming months.
- Interest rate cuts are now unlikely; rate increases are back on the table.
CPI Category Breakdown (Annual % Change)
| Category | % in Jan 26 | % in Feb 26 | & Change |
| Education | 5.10 | 5.10 | 0.00 |
| Housing & household services | 4.50 | 4.60 | +0.10 |
| Communication | 4.60 | 4.30 | -0.30 |
| Restaurants & hotels | 4.10 | 4.00 | -0.10 |
| Alcohol & tobacco | 4.60 | 3.60 | -1.00 |
| Food & non‑alcoholic beverages | 3.60 | 3.30 | -0.30 |
| Health | 3.10 | 3.10 | 0.00 |
| Misc goods & services | 2.20 | 2.60 | +0.40 |
| Recreation & culture | 2.60 | 2.50 | -0.10 |
| Transport | 2.70 | 2.40 | -0.30 |
| Clothing & footwear | 0.00 | 0.90 | +0.90 |
| Furniture & household goods | -0.50 | 0.10 | +0.60 |
| CPI All Items | 3.00 | 3.00 | 0.00 |
Biggest Contributors to Annual Inflation
- Education
- Housing and household services
- Communication
- Restaurants and hotels
- Alcohol and tobacco
- Food and non‑alcoholic beverages
- Health
Monthly Movers (February 2026)
- Clothing & footwear saw the largest monthly increase: +0.9%
- Alcohol & tobacco fell sharply month‑on‑month
- Transport and communication also declined
Economic Outlook
Fuel Prices Are the Immediate Pressure Point
- Petrol and diesel prices have risen significantly since the conflict began.
- Energy costs feed into transport, manufacturing, food production, and logistics.
Inflation Likely to Rise
- A 0.4% monthly CPI increase would push inflation toward 5% within months.
- This is a realistic scenario if oil prices remain elevated.
Interest Rate Expectations
- Rate cuts are now highly unlikely.
- The Bank of England may need to raise rates 2–3 times in 2026 unless geopolitical tensions ease.
FAQ
Why didn’t inflation rise this month?
Because February’s data was collected before the Middle East conflict and the subsequent spike in oil prices.
Will inflation rise next month?
Yes. Fuel and energy costs have already increased, and these feed into almost every sector.
Could interest rates still be cut?
Unlikely. Rising inflation pressures mean the Bank of England may need to raise rates instead.
Which categories are driving inflation?
Education, housing, food, hospitality, communication, and health remain the largest contributors.
Why is clothing inflation suddenly rising?
Seasonal pricing, supply chain adjustments, and import‑cost pressures contributed to a sharp monthly increase.