UK shop prices rose at the fastest annual pace in more than two years in February, signaling increasing price pressures as Bank of England policy makers meet to set interest rates.

Prices charged by retailers rose 2.7 percent from a year earlier, up from 2.5 percent in January, as non-food stores passed on the government’s increase in sales tax, the British Retail Consortium in London said in a report on Wednesday. The February reading is the highest since November 2008.
Retailers are under pressure to raise prices after the government increase value-added tax and the cost of commodities including oil, cotton and wheat surged. The Bank of England Monetary Policy Committee began its monthly two-day policy meeting on Wednesday after three of the nine-member panel voted to raise interest rates last month to tame above-target inflation.
“January’s VAT rise is starting to have an impact on non- food prices, pushing up overall inflation,” BRC Director General Stephen Robertson said in the report. While “food inflation appears to have stabilized for now despite on-going pressure from soaring global commodity costs,” rising fuel and energy costs “are eating into household budgets,” he said.
Food-price inflation slowed to 4.5 percent in February from 4.6 percent, the BRC said. Non-food price gains accelerated to 1.6 percent, a nine-month high, from 1.3 percent.
U.K. consumer-price inflation accelerated to 4 percent in January, twice the Bank of England’s target. The MPC will hold the key rate at a record low of 0.5 percent when it announces its decision tomorrow, according to all 61 economists in a Bloomberg News survey. It will also keep its bond-stimulus plan at 200 billion pounds ($323 billion).
A separate report by KPMG LLP and the Recruitment and Employment Confederation on Wednesday indicated that the pace of job growth accelerated last month. Their gauge of full-time job placements reported by employment consultancies rose to 62.7 from 58.2 in January, the highest in 10 months. Readings above 50 indicate an increase in hiring.
A measure of demand for temporary staff climbed to its highest since May 2007, the report showed.
(Source: Bloomberg)