UK inflation drops more than expected, hitting lowest level in nearly 2-1/2 years | Wilnesh News

Official data showed on Wednesday that UK inflation was lower than expected at 3.4% in February, down from 4% in January and the lowest since September 2021.

The overall consumer price index increased by 0.6% quarter-on-quarter, returning to positive territory after falling at -0.6% in January.

Economists polled by Reuters had expected annual growth of 3.5% in February and monthly growth of 0.7%, according to London Stock Exchange Group data.

The ONS said the greatest downward pressure was on food, restaurants and cafes, while the greatest upward pressure was on housing and fuel.

The Office for National Statistics said food and non-alcoholic drink prices rose by 5% year-on-year in February, down from 7% in January and the lowest annual rate since January 2022.

It added: “The ratio has fallen for the eleventh month in a row from its recent high of 19.2% in March 2023, which was the highest annual growth rate in 45 years.”

The closely watched core CPI figure, which excludes volatile food, energy, alcohol and tobacco prices, came in at 4.5%, below consensus expectations of 4.6% and down from January’s 5.1%.

“We have turned the corner on inflation, which means we can start to look for conditions that promote growth, which is ultimately what we all want to see,” UK Treasury Secretary Gareth Davies told CNBC on Wednesday. .”

But despite forecasts that consumer prices will return to target levels in the coming months, Mr Davis insisted the government was “by no means complacent”.

“We have to work with the Bank of England, who have the main leverage to reduce inflation through interest rates, and we have to make sure that our fiscal policy is consistent with our monetary policy to get it down to the 2% target,” he said.

The Bank of England expects headline inflation to temporarily fall back to its 2% target in the second quarter before rising again later this year, after sharply raising interest rates over the past two years to control prices.

The central bank will hold a meeting on Thursday to decide on the next steps in monetary policy. It is generally expected to keep interest rates unchanged at 5.25% while weighing when to start cutting interest rates.

Zara Nokes, global markets analyst at J.P. Morgan Asset Management, said in an email on Wednesday: “British households have endured a tough few years and this morning’s inflation data is further evidence that consumers are The future is brightening.”

She said the central bank would no doubt cheer the overall data but was unlikely to believe “the battle against inflation has been won”.

Knox added: “More good news should emerge, with headline inflation likely to be below the 2% inflation target in the spring, but most importantly, this will be driven mainly by a temporary decline in energy prices.”

“The central bank will closely monitor the medium-term inflation outlook, particularly domestic inflation originating in the services sector.”