UK consumer prices rose by 3% in the year to February 2026, unchanged from January and in line with economists’ expectations, according to data released by the Office for National Statistics (ONS) on Wednesday (25 March).
The headline CPI rate remained at 3%, while the broader CPIH measure (which includes owner-occupiers’ housing costs) held steady at 3.2%. On a monthly basis, prices increased by 0.4% in February, matching the same month a year earlier.
Core inflation, which strips out volatile food, energy, alcohol and tobacco, edged higher. CPI core rose to 3.2% from 3.1%, while CPIH core increased to 3.4% from 3.3%. Services inflation eased slightly – to 4.3% on the CPI measure and 4.2% on CPIH – marking the lowest readings in several years.
Downward pressure came from motor fuels, where petrol and diesel prices fell (petrol dropped 1.6p to 131.6p per litre, the lowest since June 2021). Alcohol and tobacco also contributed downward, thanks to heavy discounting on spirits, wines and beers. Food inflation eased to 3.3%, its lowest since March 2025, helped by lower confectionery prices.
Upward pressure came from clothing and footwear, which jumped from 0% to 0.9% as retailers introduced new spring ranges after the post-Christmas sales period. Furniture, household goods and miscellaneous services also pushed prices higher.
Notably, the ONS data for transport and airfares were collected before the escalation of conflict in the Middle East at the end of February, meaning the figures do not yet reflect any impact from rising oil prices.
Bracing for the Iran shock
While February’s data show inflation holding steady, economists and officials are already warning that the situation could change rapidly due to the ongoing conflict involving Iran, Israel and the US.
Oil prices have surged since late February, with Brent crude climbing well above $100 a barrel at times. UK petrol and diesel prices have already started rising in March, and global gas prices have jumped sharply.
Analysts warn this energy shock could add up to a percentage point to UK inflation by the end of 2026 if sustained, potentially pushing the annual rate back toward or above 3% later in the year, or even higher in some forecasts.
The UK is particularly exposed because of its heavy reliance on imported gas. Cornwall Insight has warned that the typical household energy bill could rise by more than £300 a year from this summer, pushing the price cap close to £2,000. Heating oil users have already seen prices more than double in some cases.
The Office for Budget Responsibility (OBR) and Bank of England are now revising their outlooks.
Earlier forecasts of inflation falling close to the 2% target in 2026 are at risk. Some economists now expect inflation to average around 3% or higher through parts of the year, with potential knock-on effects for interest rates, borrowing costs and growth.
The Bank of England kept rates on hold at 3.75% in February, but markets are now pricing in fewer, or even no, rate cuts this year, and some analysts see the possibility of hikes if second-round effects from energy costs feed into wages and service prices.
For now, February’s data provide a brief moment of stability. Lower fuel prices in the recorded period helped at the pumps, and food price growth continued to moderate.
But with clothing prices rising and energy costs set to climb in the coming months, the feel-good factor may be short-lived.
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