United Kingdom inflation slows to 2.7pc, say official data

UK inflation rate eases to 2.7 percent in February

United Kingdom inflation slows to 2.7pc, say official data

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.

It would see the cost of living drop back from 3% where it is has remained since the end of previous year.

"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", Phil Gooding, the ONS' head of consumer price inflation said in a statement.

However, Tuesday's number - which the Bank of England was given special early access to - suggests that inflation is set to fall sharply as the year progresses, potentially slowing the pace of any BoE rate hikes in 2018.

Most economists had expected the cost of living to rise by less than it did last time, but they hadn't quite anticipated such a sharp slowdown. But if the most recent figure of 2.5% proves to have held steady or even risen slightly, the squeeze has definitely loosened its grip.

The sharp fall in the value of the pound following the UK's vote to leave the European Union in the summer of 2016 has raised the cost of imports and pushed up the rate of inflation. February's print was the lowest inflation level since the March of 2015.

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Andrew Sentance, senior economic adviser at PwC, said: "It is not a surprise to see United Kingdom inflation starting to fall back". As the post-referendum currency effect fell out of the year on year comparisons, price rises were always likely to ease back.

He says: 'The drop in inflation creates some breathing space for the Bank of England's Monetary Policy Committee when it comes to increasing interest rates.

"A further interest rate rise would be justified this spring".

Kevin Doran, chief investment officer at financial provider AJ Bell takes a similar view.

He added: "We still think that the MPC will be surprised by how quickly inflation falls".

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