UK inflation falls to 3.4% in February to lowest level for two and a half years
UK inflation fell to 3.4% in February – the lowest level for two and a half years – according to official figures that show the annual rate of price rises starting to ease again after remaining unchanged the previous month.
The decline in the consumer prices index (CPI) from 4% in January will give a boost to Rishi Sunak, who has pledged to reduce inflation, and add to speculation that the Bank of England will cut interest rates in the summer.
Most economists had predicted that February’s headline figure from the Office for National Statistics (ONS) would drop to 3.5% – the lowest since September 2021, when it was 3.1%. A reduction in the rate of inflation does not mean that prices are falling, just that they are rising more slowly.
Investors are betting that inflation will tumble further through the spring months, reflecting the sharp decline in the price of natural gas since last year and a slowdown in food price rises.
The Bank maintains an inflation target of 2%, and the central bank is forecasting that CPI will fall below 2% in April and staying there for much of the summer. However, the central bank’s policymakers are expected to leave the base interest rate unchanged at 5.25% when they meet on Thursday this week.
In February last year, annual inflation was 10.1%, down from a peak of 11.1% in October 2022.
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