The Government will have to do more to bring inflation under control after an unexpected jump in prices, No 10 has admitted.
Inflation measured by the Consumer Prices Index hit 10.4 per cent in February, the Office of National Statistics (ONS) said, up from 10.1 per cent in the previous month.
On Thursday the Bank of England will announce whether it is raising interest rates again in an attempt to bring inflation under control.
Rishi Sunak has promised to halve inflation and ministers have previously been encouraged by projections that the rate could fall below 3 per cent by the end of this year. But in the wake of the shock ONS data, the Government warned there was no guarantee it would indeed reduce in the coming months.
The Prime Minister’s spokesman said: “This illustrates reducing inflation is not something that is automatic, it’s not something we’re on a glidepath to do, it requires discipline and making difficult decisions – that’s why we want to stick with our plan to get inflation under control.”
He said that the UK was suffering higher inflation than most other major economies because of a particular increase in the prices charged for hospitality and clothing, as well as a high degree of exposure to global energy prices.
Chancellor Jeremy Hunt said: “Falling inflation isn’t inevitable, so we need to stick to our plan to halve it this year. We recognise just how tough things are for families across the country, so as we work towards getting inflation under control we will help families with cost of living support worth £3,300 on average per household this year.”
Interest rates set by the Bank of England currently stand at 4 per cent after being hiked at 10 consecutive meetings since late 2021.
Commentators had speculated that the Bank may stop raising rates in response to the recent turmoil in the finance industry, which was partly sparked by the adjustment to an environment of higher interest rates. But the increase in inflation makes an 11th hike more likely.
Opposition parties accused the Government of failing to insulate people from the effects of inflation.
Shadow Chancellor Rachel Reeves said: “The reality is that under this Tory Government families are feeling worse off and nothing is working better than it did 13 years ago. The cost of living crisis is still biting hard and taxes are rising, yet the Government chose to use the Budget to hand a £1bn bung to the top 1 per cent.”
The poorest households are facing a higher inflation rate because the price of essential goods has risen particularly rapidly, according to the Resolution Foundation. The poorest 10th has been hit with a 12 per cent increase in costs, compared to less than 9 per cent for the richest.
James Smith, research director at the foundation, said: “Hospitality and food costs continue to drive up inflation. The latter means lower-income families are facing the greatest price pressures of all, with an effective inflation rate above 12 per cent.
“Significant falls in inflation are still on the cards in the coming months, with household energy costs set to start falling from July, and signs that pay growth has stalled.”