Published: Wed, March 21, 2018
Markets | By Josh Butler

Inflation cools, but spring rate rise still on cards

Inflation cools, but spring rate rise still on cards

"The largest downward contributions to the change in the rate came from transport and food prices, which rose by less than a year ago".

The ONS' preferred measure of inflation, the Consumer Prices Index including owner occupiers' housing costs (CPIH) stood at 2.5 per cent in February 2018, down from 2.7 per cent in the year to January.

Economists and the Bank believe inflation's upward march has run its course and will start to unwind over the coming months.

Phil Gooding, ONS statistician, said: "A small fall in petrol prices alongside food prices rising more slowly than past year 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".

The country's inflation slowed down from 3% to 2.7%, which is the lowest level since July 2017.

Today's fall will ease the pressure on squeezed households and substantially reduces the likelihood of another interest rate rise.

Despite the fall in inflation, many households are still feeling pressure in their budgets.

Seen @ St. Patrick's Day Parade in Pittsburgh, a tribute to Dan Rooney
A parade participant reads a blessing at 11th and MA streets before the start of the Lawrence St. People of many cultural backgrounds came out to celebrate the Irish heritage.

Economists expect those figures to show pay growth edged higher, to an annual rate of 2.6% in the three months to January.

The BoE expects wages to grow more quickly than inflation later this year.

The ONS also said house prices in January rose by an annual 4.9 percent across the United Kingdom as a whole, down a touch from 5.0 percent in December but significantly higher than closely watched house price indexes from mortgage lender Halifax and Nationwide.

Inflation climbed in Britain to as high as 3.1 per cent in November, pushed up by voters' June 2016 decision to leave the European Union, which hammered the value of the pound and made imports more expensive.

"Whilst we are moving back towards a position where there will be growth in real wages, that is wages adjusted for inflation, any substantial growth in real living standards is still some way off".

Jacob Deppe, the head of trading at online trading platform Infinox, added: "While the Monetary Policy Committee (MPC) meets on Thursday it seems highly unlikely that it will agree to hike rates just yet". As the post-referendum currency effect fell out of the year on year comparisons, price rises were always likely to ease back.

In the contrary, Luigi Marinus, portfolio manager at PPS Investments said, "This relatively low level of inflation will put pressure on the Reserve Bank to cut interest rates in their next meeting".

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