In a promising sign for living standards across the country, the rate of inflation across the UK fell to its lowest level since July last month.
The Office for National Statistics said yesterday that consumer price inflation on a 12-month basis was 2.7 per cent in February, down from 3 per cent in January and the lowest level since last July, when inflation stood at 2.6 per cent.
The largest downward contributions came from transport and food prices, which rose less than they did last year. Additionally, falling prices for accommodation services also had a downward effect, the ONS said.
Average petrol prices fell by 0.2p per litre between January and February, which compares with a rise of 1.6p between the same two months a year ago.
The price of an average overnight hotel stay also fell, while food and non-alcoholic beverage prices rose by 0.1 per cent between January and February.
— ONS (@ONS) March 20, 2018
Inflation climbed steadily in the aftermath of the UK’s June 2016 vote to quit the EU as the pound fell sharply against a slew of other global currencies.
That translated into higher import costs, which in turn forced a rise in the price of goods, constraining consumers’ spending appetites and bruising broader economic growth.
But since then the pound has tentatively stabilised and many forecasters have said that inflation has probably peaked. Ed Hutchings, a portfolio manager at Aviva Investors, has stressed the its’ likely the inflation will continue to fall and that uncertainty around Brexit negotiations had been “somewhat reduced”.
Looking ahead, it is likely that UK inflation will continue to recede.
Tej Parikh, senior economist at the Institute of Directors, agreed with Mr Hutchings saying that:
The peak impact of sterling’s depreciation on inflation now appears to have largely washed through.
He added that yesterday’s figure also furthers the case for the Bank of England to hold fire on an interest-rate rise at its meeting later this week.
The Monetary Policy Committee (MPC) raised interest rates in November from 0.25 per cent to 0.5 per cent, the first increase in a decade, in order to stop inflation getting out of hand and to bring it back down to the Bank’s official 2 per cent target.
The Bank is expected to increase rates in May