TL;DR
- Inflation held at 3% in February, in line with expectations
- But the data was collected before the US-Iran conflict began, so it’s already out of date
- Economists now fear inflation could exceed 5% later this year
- Energy prices are surging and another cost-of-living crisis could be on the horizon
- Whilst the figures look okay on paper, the reality on the ground is changing fast
The ONS published the latest inflation figures today, and on the surface, they look steady. Inflation held at 3% in February, exactly where analysts expected it to be.
Unfortunately, those numbers are already old news.
The data was collected before the US-Israeli strikes on Iran at the end of last month. Since then, global energy prices have surged and economists are now warning that inflation could exceed 5% later this year — more than double the Bank of England’s 2% target.
So what actually drove February’s numbers?
Clothing and footwear prices rose at their fastest pace since March last year, pushing inflation up. Petrol prices, on the other hand, fell to an average of 131.6p per litre, the lowest since June 2021, helping to keep the headline figure in check. Alcohol prices also dropped as retailers offered discounts to drum up demand.
All of that feels very far away from where we are right now.
Why does this matter for your money?
Those petrol prices that helped keep February’s figures down? They’ve already surged since the conflict began, thanks to the closure of the Strait of Hormuz, the waterway through which a fifth of the world’s oil supply passes.
Frustratingly, any easing of cost-of-living pressure that many of us were hoping for this year could be about to go into reverse.
The chancellor Rachel Reeves says the government has a plan, including £150 off energy bills and targeted support for those on the lowest incomes. But she has ruled out universal support for households, unlike the blanket package offered during the 2022 energy crisis.
We know it’s a lot to take in. But you don’t have to navigate it alone.
We broke down exactly what the conflict in Iran means for your energy bills, mortgage, investments and pension here.