UK inflation held steady at 3% in February, before the Iran war pushed global energy prices higher. Official figures showed the consumer prices index (CPI) met analysts’ expectations but remained above the government’s 2% target.
The outlook for inflation has changed sharply since the conflict began. Oil and gas prices surged after the effective closure of the Strait of Hormuz.
Bank of England policymakers had expected CPI to fall to 2% in the first quarter, which could have allowed further interest rate cuts. However, last week the monetary policy committee left rates unchanged. Markets now expect a possible increase.
Chancellor Rachel Reeves told MPs on Tuesday that the government is reviewing ways to provide targeted support to households facing much higher utility bills in the coming months.
As global energy costs continue to rise, UK policymakers and financial markets are watching inflation closely.
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