Households face squeeze as inflation climbs to three and a half year high

(c) Sky News 2017: <a href="http://news.sky.com/story/households-face-squeeze-as-inflation-climbs-to-three-and-a-half-year-high-10809437">Households face squeeze as inflation climbs to three and a half year high</a>
 

Inflation has surged to its highest level for three and a half years adding to fears of a squeeze on households as wage growth stalls.

Higher food and fuel prices lifted the Consumer Price Index measure of inflation to 2.3% in February, up from 1.8% the month before and a much sharper uptick than expected.

It means the rise in the cost of living is catching up with the rate of regular pay growth, which also stood at 2.3% in the latest available official data, covering the three months to January.

The increase in inflation is partly the result of the collapse in the value of the pound since the Brexit vote, which has pushed import costs higher.

Figures from the Office for National Statistics (ONS) showed food was becoming more expensive again - up 0.3% on the same month last year - after 31 months in a row of deflation amid a supermarket price war.

Further increases in fuel prices also contributed to higher inflation, the ONS said.

Inflation was at the highest rate since September 2013. Economists had expected a rate of 2.1%.

It was the first time CPI has gone above the Bank of England's 2% target since November 2013.

Sterling rose by a cent to nearly $1.25 on the figures, which will add pressure on the Bank of England to consider how much longer it can continue its current ultra low interest rate policy.

A separate measure of inflation called CPIH, which includes housing costs and is now the preferred ONS headline measure, also climbed to 2.3%

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