Energy Costs Push Inflation To 9-Month High

Rising energy and petrol bills combined to push inflation to a nine-month high in February, tightening the household spending squeeze.

The Office for National Statistics (ONS) measured the Consumer Prices Index (CPI) at an annual rate of 2.8% in February, up 0.1% on the previous month and in line with economists' forecasts.

The ONS said the increase was also driven by higher video game and photographic equipment costs.

Higher energy bills saw housing costs rise 0.5% between January and February, while transport prices rose 1.2% due to a 4p-a-litre surge in the cost of petrol and 9% increase in air fares.

CPI continues to outstrip wage growth in the UK and the gap is expected to widen as experts predict inflation will top 3% by the summer.

The Treasury shrugged off the increase, insisting it was "in line with market expectations and down by almost a half from its peak of 5.2%."

But there are signs of even further inflationary pressure in the economy as the weaker pound leads to higher oil import costs.

Just last month, the Bank of England forecast that CPI inflation would remain above its 2% target into 2016, pushed up by higher energy and university tuition prices.

The latest inflation figures also cast doubt on the bank's ability to pump more money into the flat-lining economy through its quantitative easing programme.

We learn on Wednesday whether out-going governor, Sir Mervyn King, voted again to extend QE by a further £25bn when the minutes of this month's meeting of the monetary policy committee (MPC) are released.

In February, the MPC voted 6-3 against further stimulus.

Commenting on the rise in inflation, TUC General Secretary Frances O'Grady called for action from the Chancellor George Osborne: "Workers are suffering a double whammy of rising prices and stagnating wages.

"Ministers once reassured us that the recovery would be on track by now. Instead the squeeze on people's pay is getting even tighter.

"A boost to living standards is urgently needed in tomorrow's Budget, particularly with yet more welfare cuts due to kick in next month."

:: The Retail Prices Index (RPI), which also includes housing costs, dropped to 3.2% in February from 3.3% in January as food inflation eased slightly.

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