'Turning point' as inflation falls to seven-month low

'Turning point' as inflation falls to seven-month low

It said in its February report that rising oil prices would keep inflation above 3% in the short-term and see it take longer to return to target.

Consumer price inflation slowed more than expected to 2.7% in February from 3% in January.

British inflation is running at more than double the rate in Germany and France.

"This fallback in inflation therefore provides little reason for the Bank of England to hold back from gradually raising interest rates", said Andrew Sentance, a former BoE rate-setter who is now an economic adviser with accountancy firm PwC.

Many economists think that Monday's deal between the British government and the European Union on the outlines of a transition period after Brexit day on March 29, 2019, makes a rate hike more likely.

Tuesday's figures also suggested less pressure in the pipeline for consumer prices.


Inflation had been steadily climbing in the aftermath of the Brexit vote in June 2016 - whose result led to a collapse in the pound, driving import prices higher and feeding through to the cost of goods in shops.

Lower petrol prices and cheaper hotel rooms - compared to a period past year when price readings were taken on Valentine's Day - were among the reasons for the decline, which was slightly bigger than expected.

Talking about it, the ONS's Phil Gooding said: "Hotel prices also fell and the cost of ferry tickets rose more slowly than past year, when prices were collected on Valentine's Day when many people could have been taking mini-breaks".

"Hotel prices also fell and the cost of ferry tickets rose more slowly than past year, when prices were collected on Valentine's Day, when many people could have been taking mini-breaks".

Furthermore, sterling has strengthened in recent months on signs that Britain will avoid a disorderly Brexit.

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. "And we are increasing the National Living Wage, which is already helping the lowest earners see their pay rise by nearly 7% above inflation". Despite record low mortgage rates remaining largely unchanged since the rate rise, and November's stamp duty reforms said to have already benefited 60,000 first time buyers, owning a property remains out of reach for many aspiring homeowners looking to get their foot on the housing ladder.

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