UK inflation falls to lowest since September 2021

UK inflation eased a little more than expected in February, according to figures released on Wednesday by the Office for National Statistics, fuelling expectations of a rate this summer.

The consumer price index declined to 3.4% from 4% in January, versus expectations for a fall to 3.5% and getting a touch closer to the Bank of England’s 2% target.

This marked the lowest level since September 2021.

The largest downward contributions came from food, and restaurants and cafes, while the largest upward contributions came from housing and household services, and motor fuels, the ONS said.

ONS chief economist Grant Fitzner said: "Food prices were the main driver of the fall, with prices almost unchanged this year compared to a large rise last year, while restaurant and cafe prices also slowed.

"These falls were only partially offset by price rises at the pump and a further increase in rental costs."

Core CPI - which excludes energy, food, alcohol and tobacco - rose 4.5% in the 12 months to February, down from 5.1% the month before.

Chancellor Jeremy Hunt said: "The plan is working. Inflation has not just fallen decisively but is forecast to hit the 2% target within months. This sets the scene for better economic conditions which could allow further progress on our ambition to boost growth and make work pay by bringing down national insurance as we work towards abolishing the double tax on work - but only if we can do so without increasing borrowing or cutting funding for public services."

The inflation data came just a day before the Bank of England’s latest policy announcement on Thursday.

Paul Dales, chief UK economist at Capital Economics, said the easing in inflation "probably won’t make the Bank of England sound any more dovish when it leaves interest rates at 5.25% tomorrow".

"But our view that inflation will fall below 2% in April and then ease towards 1% suggests the BoE may have to start cutting rates in the summer and reduce them to 3.00% next year."