British inflation surprisingly climbed to 10.4% in February, driven up by higher food costs and costlier beverages in pubs and restaurants.

Official statistics indicated that British inflation surprisingly climbed to 10.4% in February, driven up by higher food costs and costlier beverages in pubs and restaurants, according to official data released on Wednesday, a day before the Bank of England delivers its next interest rate decision.

Market analysts predicted that the annual CPI rate would fall to 9.9% in February from 10.1% in January, moving further away from October's 41-year peak of 11.1%.

The Bank of England is expected to announce interest rate hikes for the 11th time in a row on Thursday.

Because of the current turmoil in the global banking industry, investors are divided on whether it will halt its run of rising borrowing prices.

"Given recent market swings, this puts the Bank of England in an extremely difficult position, since it may not be enough for the Bank of England to press hold on rate rises," Quilter Cheviot's head of fixed interest research Richard Carter said.

Following the release of the figures, the pound climbed versus the dollar and the euro.

Interest rate futures indicated that the Bank of England will raise rates by at 0.25%, up from just over 50% late Tuesday.

According to the ONS, the end of January drink promotions in pubs and restaurants was the main factor driving up inflation last month, but salad item shortages also had a part.

"Food and non-alcoholic drink prices climbed at the fastest rate in more than 45 years, with significant rises for several salad and vegetable products as high energy costs and adverse weather throughout parts of Europe led to shortages and restrictions," said ONS chief economist Grant Fitzner.

Increased alcoholic beverage prices contributed 0.17% to the annual rate of inflation in February, while higher food and non-alcoholic beverage prices contributed 0.15%.

Total inflation for food and non-alcoholic beverages reached 18.0%, the highest level since 1977.

The underlying inflation rate also increased.

The core CPI, which excludes energy, food, alcohol, and tobacco and is closely monitored by the Bank of England, increased to 6.2% in February from 5.8% in January, compared to a predicted fall to 5.7%.

The annual inflation rate in the services sector, which most legislators believe is a strong indicator of underlying pricing pressures in the economy, increased to 6.6% in February from 6.0% the previous month.

The rise in inflation in the United Kingdom contrasted with a drop in the 12-month CPI rate in the United States to 6.0% in February. Eurozone inflation also fell last month, but underlying price increases accelerated.

The numbers, according to Finance Minister Jeremy Hunt, demonstrate that the predicted drop in inflation cannot be taken for granted.

(Investing.com, Reuters.com, ONS.gov.uk)