UK Inflation Surges on Food Prices Amid Underlying Easing

The UK's Consumer Prices Index (CPI) unexpectedly jumped to 3.9% in February 2025, driven by base effects and a sharp increase in food prices.

However, core inflation, which excludes energy, food, alcohol, and tobacco, eased to 4.1% from 4.4%, and services inflation moderated to 4.9% from 5.2%.

The Bank of England's Monetary Policy Committee (MPC) may be cautious due to the headline overshoot, but the continued softening in underlying indicators could give room for rate cuts later in the year.

Market expectations for a cut in May have been pared back slightly, but the underlying trend suggests that the Bank's focus on services inflation and wage growth is showing progress.