UK Inflation Drops to Lowest Point Since 2021

The UK government representatives
The UK government representatives Google

The annual inflation rate in Britain decreased more than predicted in February, as per official data revealed on Wednesday, leading to speculation about a potential interest rate cut by the Bank of England this year.

According to the Office for National Statistics, inflation fell to 3.4 per cent last month, the lowest level since September 2021, down from 4.0 per cent in January.

The consensus, as per a Bloomberg survey, was for consumer prices to increase by 3.5 per cent in February, with inflation still significantly above the Bank of England’s two-per cent target.

Expectations are high that the BoE will keep its main interest rate unchanged during an announcement set for Thursday after its latest regular monetary policy meeting. Nevertheless, analysts anticipate a potential cut in June.

Food prices were highlighted by ONS chief economist Grant Fitzner as the key contributor to the decrease, with prices staying nearly the same this year, in contrast to a substantial increase last year.

On a monthly basis, the ONS reported that CPI rose 0.6 per cent last month, in contrast to a 1.1 per cent increase in February 2023.

Finance minister Jeremy Hunt welcomed the news, stating in a press release that Inflation has not only fallen significantly but is expected to reach the two-percent target in the coming months.

Hunt cautioned against increasing borrowing or cutting funding for public services to fund tax cuts, ahead of a general election this year where his Conservative party is forecast to lose power to main opposition Labour.

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