The Consumer Prices Index rate of inflation rose steadily to 1.9 per cent in the 12 months to February 2019, up from 1.8 per cent in January 2019, according to the Office for National Statistics (ONS).

Aegon head of pensions, Kate Smith, noted that it is the first time it has increased since November 2018, and is now just below the Bank of England’s target rate of 2 per cent.

“Households will be hoping the increase in inflation and stabilisation of wage growth does not herald a reversal of the increasing wage growth and low inflationary environment that they have experienced over the last half year. However, whilst inflation remains low, individuals should look to save any additional income where they can, particularly given that auto-enrolment pension contributions are about to increase and there is continued uncertainty around what impact Brexit may have on people’s spending power.”

“Individuals need to think carefully about how to protect the spending power of their retirement savings, particularly if we see a continuation of the rise in inflation. The erosive effects of inflation can be very damaging and even in a period of low inflation, today’s money can dramatically reduce in spending power over the long-term.”

The ONS said rising prices for food, alcohol and tobacco, and across a range of recreational and cultural goods produced the largest upward contributions to change in the rate between January and February 2019.The largest, offsetting, downward contribution came from clothing and footwear, with prices rising between January and February 2019 but by less than between the same two months a year ago.

Hargreaves Lansdown senior economist, Ben Brettell, said markets were “broadly unmoved” by the news, which will also do little to change the expected path of interest rates.

“The Bank of England has been setting a neutral tone as Brexit approaches, with policymakers hamstrung by political uncertainty and a deteriorating global growth outlook. The Bank has said it thinks higher interest rates will be appropriate in the coming months, as it aims to keep inflation close to its long-term 2 per cent target. News from the labour market yesterday suggests companies at least are carrying on regardless, hiring workers at the fastest pace for three years. A tight labour market would normally lead to calls for higher rates, but these are far from normal times,” he said.

“If Theresa May can somehow find a way to break the political deadlock in Westminster and Brexit happens in a relatively orderly fashion, we could see rates gently nudge up later this year. If we leave with no deal, however, all bets are off. I’d expect inflation to spike as sterling weakens, but the Bank has shown willingness in the past to look through this type of inflation and keep interest rates low to support the economy. I’d expect them to do the same here.”

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