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Finance

Inflation rises to 2.5 per cent in February on rising fuel costs

18/03/2008

Inflation rose to 2.5 per cent in February from 2.2 per cent in January as soaring energy bills took effect.

Figures from the Office for National Statistics (ONS) show the consumer prices index (CPI) annual inflation is now half a percentage point above the government's two per cent target.

If inflation rises further to three per cent, Bank of England governor Mervyn King will have to write to the chancellor of the exchequer explaining how it has risen so high.

The news also makes a further cut in the interest rate unlikely in the short term, as the bank tries to bring inflation back down.

Part of the reason for the jump in fuel bills is the way price changes were introduced, the ONS said.

Last year energy price changes were phased in gradually over a four-month period but now any increases in the tariff rate are implemented in full at the time they are introduced by the energy company.

There was also a small upward effect on the inflation rate from alcohol and tobacco with cigarette and beer prices rising by more than a year ago.

Milk, cheese and egg prices rose by 17.6 per cent, the largest increase since records began in 1997.

But vegetable prices rose by less than a year ago and fruit prices fell compared with a rise a year ago, with the largest impact coming from strawberries.

Other downward contributions came from air and sea fares which rose by less than a year ago and a fall in landline telephone charges.

The retail prices index (RPI) inflation figures for February show no change from January at 4.1 per cent.