The Bank of England’s monetary policy committee meets today to decide on its base interest rate amidst shock at the latest inflation figures.

The Consumer Price Index has shown inflation in February rising again – to 10.4 per cent – with food price rises well ahead of that rate. 

This comes on top of HMRC transaction figures this week which show an 18 per cent annual drop in UK residential sales during February. There were 76,920 sales on a non-seasonally adjusted basis: the figure is down 6.0 per cent compared with February 2019  and has never been so low during the period, based on HMRC data going back to 2014.

Susannah Streeter, head of money and markets at business consultancy Hargreaves Lansdown, says: ‘’There is no respite for punishing inflation for consumers and companies, with prices becoming even hotter in February. There had been high hopes that it would finally have retreated from its double-digit heights, making a march downwards, but it has headed back towards the summit. 

“It had been touch and go about whether the Bank of England will raise rates but now with consumer price inflation rising to 10.4 per cent on the month, it looks increasingly likely a hike will be voted through. Although the banking turmoil will be front of mind, this latest snapshot and ongoing worries about a tight labour market are likely to tip the balance in favour of a rate hike.

Nicholas Hyett, an investment analyst at the Wealth Club, says: “We’re already seeing fallout from the rapid rise in interest rates around the world, with weaker banks outside the UK starting to pop under the pressure. A spike in food prices, up 18.2 per cent and the highest it’s been since 1977, and higher prices in restaurants and hotels, up 12.1 per cent, means the fight against inflation is not yet over.

“Unfortunately that leaves the Bank of England with unappealing choices  – ease back on rate rises but risk leaving inflation running higher when households are already struggling, or stay in the inflationary fight and risk further economic crunches. It’s a circle that’s not easily squared.”