UK inflation held steady in February, with headline CPI unchanged at 3.0% yoy, in line with expectations. On a monthly basis, CPI rose 0.4%, matching the pace seen a year earlier.
However, underlying pressures remain firm. Core CPI ticked up from 3.1% yoy to 3.2% yoy, coming in above expectations. While goods inflation held steady at 1.6%, services inflation eased only slightly from 4.4% to 4.3%, indicating that domestic price pressures, particularly in services, remain elevated.
The data come at a critical juncture for the Bank of England. The escalation in the Middle East and the disruption to energy supplies via the Strait of Hormuz have pushed oil and gas prices higher, threatening to reverse the disinflation trend. This leaves the Bank of England facing a more complicated policy path, with inflation risks now skewed to the upside.
