Published: Wed, March 21, 2018
Markets | By Noel Gibbs

UK inflation slows in Feb as Brexit hit to pound fades

UK inflation slows in Feb as Brexit hit to pound fades

The Office for National Statistics said Tuesday that consumer prices rose by 2.7 percent in the year to February. The annual price rise of 4.6% takes the average property value to £242,286.

Food prices rose by 0.1% between January and February, compared with a 0.8% rise the year before. Falling prices for accommodation services also had a downward effect.

The Bank of England's Monetary Policy Committee (MPC) is expected to keep its key interest rate on hold at 0.50 percent following a regular policy meeting this week, ahead of a predicted quarter-point rise at its May gathering, according to analysts. Nevertheless, data from Retirement Advantage showed that United Kingdom households will collectively need to find an extra £21.2bn a year to maintain their standard of living compared to 12 months ago- equivalent to £777.92 per household.

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"The SARB bases its interest rate decisions on what inflation is likely to be six to twenty-four months in the future not what it has come out recently at", Bishop said. There is a speculation that the European Central Bank may raise its interest rates in May.

Inflation eased to 4 percent in February from 4.4 percent in January.

ONS figures due to be published on Wednesday are expected to show that pay growth edged up to an annual rate of 2.6 percent in the three months to January.

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Paul Hollingsworth, senior United Kingdom economist at Capital Economics, said the fall in inflation "confirms that we have now reached a turning point" but that this did not diminish the case for a rate hike in May.

That means rates could climb to 1.25%.

The ONS said that a small fall in petrol prices alongside food prices rising more slowly than a year ago helped pull down inflation, as numerous early 2017 price increases due to the previous depreciation of the pound have started to work through the system.

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