UK inflation falls to near two and a half-year low of 3.4% as food pressures ease – business live | Business

The largest downward contributions to the monthly change in inflation came from food, and restaurants and cafes, the ONS says.

Today’s inflation report shows that prices for food and non-alcoholic beverages rose by 5.0% in the year to February 2024, down from 6.9% in January.

The February figure is the lowest annual rate since January 2022.

The ONS reports that the annual rates for most types of food product eased between January and February 2024, with the largest effect coming from bread and cereals.

It says:

Overall, prices for bread and cereals rose by 0.3% on the month, compared with a rise of 2.3% between January and February 2023. Prices of packs of cakes and some bread products (for example, white sliced loaves) fell between January and February this year but rose a year ago. The resulting annual rate for bread and cereals in February 2024 was 6.0%, the lowest observed since March 2022.

Other smaller downward effects came from classes such as meat, vegetables, and milk, cheese and eggs. Overall, the annual rate eased in 10 of the 11 food and non-alcoholic beverages classes with oils and fats the exception; its annual rate rising from 8.0% in January to 8.3% in February 2024.

Underlying inflation also eased in February.

Core CPI (which excludes energy, food, alcohol and tobacco) rose by 4.5% in the 12 months to February 2024, down from 5.1% in January.

Goods inflation slowed from 1.8% to 1.1%, while the CPI services annual rate eased from 6.5% to 6.1%.

Newsflash: UK inflation has fallen to its lowest level in two and a half years.

The Consumer Price Index has slowed to 3.4% in February, down from January’s 4%, a sign that prices rose at a slower rate last month.

That’s the lowest since September 2021, and a slightly larger fall than the City expected, data from the Office for National Statistics shows.

Good morning.

Eyes in the City of London, and Westminster, are on UK inflation, with the latest cost of living data due at 7am this morning.

Inflation is expected to have slowed last month; economists estimate the Consumer Price Index (CPI) will drop to 3.5% for February.

That would be the lowest in almost two-and-a-half years (since September 2021), and mean prices are rising at a slower rate than January, when annual inflation was 4%.

A drop in inflation could encourage the Bank of England to consider cutting interest rates in the coming months – as its mandate is to keep inflation sustainably at 2%.

Kyle Rodda, senior financial market analyst at capital.com, explains:

UK inflation data will be a precursor to tomorrow’s Bank of England meeting, with forecasters projecting a meaningful drop in prices last month.

Core inflation is expected to moderate to 4.6% from 5.1% in February, while headline is tipped to decline to 3.5% from 4%. Inflation in the UK has been more stubborn than other G10 economies, partly due to elevated wage growth and energy price shocks.

The dynamic means the markets are pricing in relatively fewer cuts from the Bank of England than other major central banks.

The government will also be hoping for a substantial drop in inflation, as it would bolster Rishi Sunak’s claim that “the economy is turning a corner”, after it fell into recession at the end of last year.

The agenda

• 7am GMT: UK inflation report for February

• 9.30am GMT: UK house price and rental index for January

• 10.15am GMT: UK bank bosses to face questions from Treasury Committe

• 11am GMT: US mortgage applications data

• 3pm GMT: Eurozone consumer confidence report

• 6pm GMT: US Federal Reserve sets interest rates