United Kingdom consumer price inflation slowed down in February 2018

21 March, 2018, 08:19 | Author: Luis Fowler
  • Screen Shot 2018 03 20

Official data published on Tuesday showed consumer prices rose by an annual 2.7 percent last month, the weakest increase since July of previous year.

United Kingdom inflation fell to 2.7 per cent in February, slowing more than expected and relieving some of the pressure on the Bank of England (BoE) to hike interest rates.

'Even if interest rates do start to rise, any progress is likely to be slow and there is a long way to go before savers will see returns that even break even with inflation'. It is also higher than in the United States, where the Federal Reserve looks set to continue its series of interest rate hikes this week.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said investors should expect a significant change of course for the Bank of England: "In theory that relieves some of the pressure on the Bank of England to raise interest rates, though falling inflation is very much in their script, so these latest figures don't really alter what we can expect from the Bank in the coming months". There is a speculation that the European Central Bank may raise its interest rates in May.

The Pound was bid higher during early trading in London Tuesday as markets positioned for the February volley of United Kingdom inflation figures, which are expected to show domestic price pressures in retreat.

The British pound dipped on Tuesday, erasing some of its earlier gains after data showed United Kingdom inflation slowed more than expected in February.

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The inflation hit a six-year high of 3.1% in November, and then slowed down to 3%, a level it maintained over the past two months.

Prices jumped in February of last year, taking some of the steam out of the latest year-on-year comparisons, the Office for National Statistics said.

British inflation was weaker than expected in February as the impact of the 2016 Brexit vote faded from the figures, easing some of the squeeze on consumers who have seen their pay rise more slowly than prices.

Talking about it, the ONS's Phil Gooding said: "Hotel prices also fell and the cost of ferry tickets rose more slowly than a year ago, when prices were collected on Valentine's Day when many people could have been taking mini-breaks".

Furthermore, sterling has strengthened in recent months on signs that Britain will avoid a disorderly Brexit. That should help to ease some of the inflation pressure which has hurt the spending power of many households. It expects wages to grow more quickly than inflation.

"This fallback in inflation therefore provides little reason for the Bank of England to hold back from gradually raising interest rates".

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