Fuel costs push inflation rate up to 2.8%

Petrol nozzles

UK inflation rose to 2.8% in February, after four months of being stuck at 2.7%.

The Consumer Prices Index was pushed up last month mostly due to increases in electricity and gas bills, according to the Office for National Statistics. Petrol, air transport and recreational goods such as games and photographic equipment were also cited as key drivers of inflation.

Many people will be feeling the effects of rises in fuel prices; petrol increased 4 pence per litre between January and February, with diesel not far behind. Over the same period last year the prices increases were less than half this rate at 1.9 and 1.4 pence per litre respectively.

The ONS says these these rises were offset by prices of confectionary and soft drinks, for example, coming down.

Hammer blow for households

William Hunter, director of Hunter Wealth Management, says rising inflation is a "hammer-blow" for UK households. "The high cost of living is amplifying an already brutal economic situation tenfold." He adds that the Bank of England does not appear to have any mechanism in place to control it.

Financial statistics company Moneyfacts says to beat inflation, a basic-rate taxpayer needs to find a savings account paying at least 3.5% a year, and a higher-rate payer needs to find 4.66%.

The new measure of consumer price inflation, CPIH, which includes owner occupiers' housing costs, was recorded for the first time in February and currently the 12-month rate stands at 2.6%, up from 2.5% in January.

A further new measure of inflation, the RPIJ, which is a new variant of the Retail Prices Index, has recorded a slight decrease in the rate at 2.6%, down from 2.7%. RPI also fell slightly, from 3.3% in January to 3.2% in February.

Economic analysts Capital Economics says inflation looks likely to peak at about 3.5% over the summer before easing back slightly.

This article was written for our sister website Money Observer

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