UK inflation holds steady at 3% as price pressures persist

The UK’s rate of inflation remained unchanged at 3% in the year to February 2026, according to the Office for National Statistics (ONS), in line with expectations and marking the lowest level since March last year.

The latest data shows that the Consumer Prices Index (CPI) rose by 3.0% annually, the same as in January, while the broader CPIH measure – which includes owner occupiers’ housing costs – held steady at 3.2%. On a monthly basis, both CPI and CPIH increased by 0.4%, unchanged from the same period last year.

Economists had widely forecast the 3% reading, suggesting that while inflation has fallen significantly from previous highs, progress towards the Bank of England’s 2% target may be slowing.

Mixed drivers behind stable inflation

The ONS said clothing prices provided the largest upward contribution to inflation, reversing a decline seen a year earlier. However, this was offset by falling motor fuel costs, alongside declines in alcohol prices due to promotional activity.

Food prices showed little movement, contributing further to downward pressure compared with modest increases at the same time last year.

Core inflation – which strips out volatile elements such as energy and food – edged higher. Core CPI rose to 3.2% from 3.1%, while core CPIH increased to 3.4%. Services inflation, a key indicator of domestic price pressures, eased slightly but remains elevated at 4.3% under CPI and 4.2% under CPIH.

Economists warn of uncertain path ahead

ONS chief economist Grant Fitzner said inflation had stabilised following January’s slowdown: “After last month’s slowdown, annual inflation was unchanged.

“The largest upwards driver was the price of clothing, which rose this month but fell a year ago.

“This was offset by falls in petrol costs, with prices collected before the start of the conflict in the Middle East and subsequent rise in crude oil prices.

“A fall in the cost of alcoholic drinks due to promotion activity, compared with a rise last year, was also a downward driver, while little change in food prices, again compared with a small rise this time last year, added further downward pressure.”

However, analysts cautioned that the figures may not fully reflect emerging global risks. The data was collected before the escalation of conflict in the Middle East, which has since pushed up crude oil prices and could feed into future inflation.

He warned that businesses, particularly SMEs, are facing continued uncertainty from rising input costs and supply chain pressures.

“For SMEs, this wider uncertainty, alongside persistent cost pressures, particularly across supply chains and distribution, is squeezing margins, complicating planning and making it harder to forecast with confidence. While these challenges cannot always be anticipated, they reinforce the importance of staying flexible, with businesses that keep a close eye on cash flow and remain adaptable in their plans better placed to navigate the months ahead and seek external support where needed to fund any shift in strategy.”

Outlook remains unclear

While the steady inflation rate may provide some reassurance to policymakers, the combination of persistent services inflation and external geopolitical risks means the outlook remains uncertain.

With price pressures proving more stubborn in key sectors, the Bank of England may face a delicate balancing act in the months ahead as it weighs interest rate decisions against a backdrop of fragile economic conditions.