BUSINESS & MARKETS LIVE: Inflation stable at 3% before the Iran war

By: dailymail Posted On: March 25, 2026 View: 20

By ANGHARAD CARRICK, BUSINESS NEWS EDITOR

Updated: 05:04 EDT, 25 March 2026

Inflation was unchanged at 3 per cent in the 12 months to February, according to the Office for National Statistics.

As expected, the Consumer Price Index was stable last month, before the Iran war sent energy prices soaring, stoking inflation fears.

Economists warn that the headline rate of inflation will reach near double the Bank of England’s 2 per cent target later this year.

Core inflation, which excludes energy, food, alcohol and tobacco, rose by 3.2 per cent in February, up from 3.1 per cent in the previous month.

FTSE opens higher

The FTSE 100 opens up 0.88 per cent to 10,051

Where does it leave the Bank of England?

Markets are pricing in as many as four interest rate rises this year, but economists have a different idea.

Today's inflation reading make it more difficult for the Bank of England.

'The BoE won't be hiking into a temporary inflation spike,' says Neil Wilson, investor content strategist at Saxo.

'It's made it clear it's worried about second order effects from inflation but the conditions for wages to rise and businesses to raise prices is not there like it was in 2022. The labour market is in an entirely different situation today.

'Further, the fiscal and monetary backdrop is entirely different now. Rates are already restrictive not at the zero lower bound. The fiscal position is more fragile, and while this supply shock is forcing up prices in the near-term, ultimately the focus needs to shift to the growth outlook and demand destruction, which will be disinflationary in the medium to longer term.'

Iran war could add £150 to the food shop

The ONS figures published this morning show the calm before the storm. Separate figures from the Institute of Grocery Distribution forecast that food inflation will more than double from 3.3 per cent in February to 8 per cent in June.

A sharp rise in prices by June would see food inflation average around 6.4 per cent across the year, adding over £150 to the average household’s annual grocery bills.

Inflation at 3%

The Consumer Price Index was unchanged at 3 per cent in February, as expected. But economists warn that the ONS figures are already 'old news' and it is likely to be the lowest inflation reading for 'some time'.

Lindsay James, investment strategist at Quilter said: 'Today’s CPI print is old news. It shows an economy where inflation appeared to be stabilising and was expected to drift towards 2.1% in Q2, helped by earlier gas price declines and supportive energy policy. But that benign path has already been overtaken by what has been described by the IEA as the “greatest global energy security threat in history”. For that reason, February is likely to represent the low point for UK inflation for some time.'