Report Summary

Period covered: February 2026

3 minute read

Note: This report summary is one or two months behind the current month as standard reporting practice. The content is indicative only and incomplete with certain data undisclosed. Subscribe to access this data or take out a free 30-day subscription trial now.

Inflation

Headline inflation holds steady: CPI remained at 3.0% YoY in February, with monthly price growth matching last year.

Core inflation rises slightly: Core CPI rose to 3.2% YoY rising from 3.1% in the previous month. Goods inflation held at 1.6%, while services edged marginally lower to 4.3% as underlying pressures remained elevated.

Clothing drives the monthly move: Clothing and footwear inflation rose to 0.9%, the strongest rise for a year. Prices increased on the month as discounting unwound and new season ranges entered stores, led by womenswear and childrenswear.

Alcohol inflation softens: The annual rate fell to 3.6%, the lowest level in two years. Price declines across wines, spirits and beer was driven by increased discounting compared with price rises a year ago.

Transport continues to ease: Inflation slowed to 2.4%, with motor fuel deflation deepening. Petrol and diesel prices fell again, while air fares rose more sharply than a year ago, but this only partially offset the broader downward trend.

Food inflation moves lower again: The annual rate eased to 3.3%, with prices flat on the month. The decline was driven by confectionery, particularly chocolate, reversing last year’s increase. However, a prolonged conflict in the Middle East could weigh on food prices due to increased energy and fertiliser costs.

Inflation outlook: Inflation has stabilised for now, but the direction of travel is no longer as clear as it was a month ago.

The external environment has shifted abruptly. The surge in energy prices following the escalation in the Middle East is feeding directly into the inflation outlook. Oil and gas costs have repriced at speed, and this will move through fuel, utilities, food production and distribution over the coming months.

In the near term, there will be little evidence of these pressures, with regulated energy prices not adjusting until the middle of the year, delaying the impact on household bills.

Headline inflation is expected to drift lower into the spring as last year’s price increases drop out of the comparison.

But the second half of the year will look very different. Higher wholesale energy costs point to a renewed rise in inflation, with a peak in the region of 3.5% in the autumn the current central expectation.

Monetary policy has shifted, with markets moving quickly to price in rate increases following the escalation in the Middle East. Current conditions indicate there will be an extended pause in Bank Rate, with policymakers waiting for clearer evidence of second round effects before tightening.

For households, the picture has become less predictable again. The easing in food and fuel at the start of the year provided some relief, but rising cost pressures risk reversing part of that improvement. The sense of stability in inflation is now under pressure, with its path once again tied closely to external shocks.

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The headline Consumer Price Index (CPI) rose by 3.0% YoY in February, unchanged from the previous month.