Inflation Update February 2026: CPI Holds at 3.0% as Energy Costs Could Rise
Inflation remained steady in February, with the Consumer Prices Index (CPI) holding at 3.0%, unchanged from January. While this stability is a positive sign in the short term, there are growing concerns that rising energy prices linked to tensions in the Middle East could push inflation higher in the coming months.
For you, this means the cost of living is not increasing as quickly as before, but there are still risks ahead that could affect both your household costs and mortgage rates.
Key points at a glance
- The Consumer Prices Index (CPI) stayed at 3.0% in the 12 months to February 2026, unchanged from January.
- Monthly CPI rose by 0.4% in February, matching the same increase seen last year.
- Clothing prices were the main upward driver of inflation.
- Falling petrol prices helped offset increases elsewhere.
- Core inflation rose slightly to 3.2%, showing underlying pressures remain.
- Rising energy costs linked to conflict in the Middle East could push inflation higher in the coming months.
What’s driving the numbers
Inflation has remained unchanged because increases in some areas have been balanced out by decreases in others.
Clothing and footwear
Clothing prices were the largest contributor to inflation this month.
Prices rose by 0.9% over the year to February, compared with no change in January.
On a monthly basis, prices increased by 0.6%, as new season stock replaced discounted items from earlier in the year.
This shift away from heavy discounting has pushed prices higher.
Transport
Transport costs helped keep inflation from rising further.
Fuel prices fell over the month, with petrol down by 1.6 pence per litre and diesel down by 1.4 pence.
Compared to last year, motor fuel prices are 4.6% lower, which has helped reduce overall inflation.
However, these figures were collected before the escalation of conflict in the Middle East. Since then, oil prices have increased, which may lead to higher fuel costs in the near future.
Air fares also rose by 9.2% between January and February, adding some upward pressure.
Food and drink
Food price growth has eased slightly.
Food and non-alcoholic beverage prices rose by 3.3% over the year, down from 3.6% in January.
On a monthly basis, prices were unchanged, offering some stability for household budgets.
Some items, such as chocolate products, saw price reductions, while dairy and vegetables continued to rise.
Alcohol and tobacco
This category provided some relief.
Prices rose by 3.6% over the year, down from 4.6% in January.
On a monthly basis, prices fell slightly, largely due to discounting across alcohol products.
Housing and household services
Housing remains one of the biggest contributors to inflation.
Prices in this category rose by 4.6% over the year to February.
Although the pace of increases has stabilised, housing costs are still keeping overall inflation elevated.
Core inflation
Core inflation, which excludes more volatile items like food and energy, rose slightly to 3.2%.
This increase suggests that underlying inflation pressures are still present, even though headline inflation has not moved.
How CPI compares internationally
Inflation remains higher than in many comparable economies.
CPI is currently at 3.0%, compared with lower levels seen across Europe.
This highlights that inflation is proving more persistent, which may influence how quickly interest rates can change.
What this means for interest rates
With inflation still above the Bank of England’s 2% target, and core inflation edging higher, there is unlikely to be any immediate reduction in interest rates.
In fact, expectations have shifted in recent weeks.
Earlier in the year, markets expected interest rate cuts. Now, there is growing expectation that rates could remain higher for longer, or even rise, particularly if energy costs continue to increase.
The Bank of England has already taken a cautious approach, holding the base rate at 3.75% in its latest meeting.
Future decisions will depend heavily on how inflation reacts to rising oil and gas prices.
What this means for you
For you, this creates a mixed picture.
On one hand, inflation has stabilised, which is a positive sign for the economy.
On the other, rising energy costs could push prices back up, which may delay improvements in mortgage rates.
If your fixed rate is ending, you are planning a move, or reviewing your protection, it is important to stay informed and consider your options early.
Fixed-rate mortgages may still offer certainty, particularly in a market where future rate movements are less predictable.
At Kerr & Watson, you can get clear, tailored advice to help you navigate these changes and make confident decisions.
Looking ahead
There are several key factors that will shape inflation in the coming months.
Energy prices, particularly oil and gas, which are already rising following tensions in the Middle East.
Fuel costs, which may increase and feed through into transport and household expenses.
Core inflation, which has edged up and shows underlying pressures remain.
Future inflation data, particularly the March release, which may begin to reflect higher energy costs.
The Ofgem energy price cap changes later in the year, which will provide a clearer picture of how energy prices are affecting households.
Conclusion
Inflation held steady at 3.0% in February 2026, with falling fuel costs and easing food prices balancing out increases in clothing and other areas.
While this stability is encouraging, there are clear risks ahead. Rising energy prices linked to tensions in the Middle East could push inflation higher in the coming months, which may impact interest rates and mortgage costs.
By staying informed and planning ahead, you can make better decisions about your mortgage and financial future.
At Kerr & Watson, you can rely on clear, straightforward advice to help you navigate changing market conditions and secure the right solution for your needs.
If you would like to discuss how the latest inflation update could affect your mortgage or protection plans, get in touch today.
Read more: Consumer price inflation, February 2026
