UK inflation has eased to 3.4 per cent in February with food and energy prices driving it down – coming as a welcome boost for Britons.
The Office for National Statistics (ONS) said that Consumer Prices Index inflation was down from 4 per cent in January and the lowest level since September 2021.
Most economists had been expecting inflation at 3.5 per cent last month.
Inflation is now closer towards the Bank of England’s 2 per cent target and comes ahead of the latest interest rate decision on Thursday.
Policymakers are widely expected to keep rates on hold at 5.25 per cent, but the steep fall in the CPI is likely to reinforce expectations that the Bank is moving closer to cutting rates later this year.
UK inflation eased to 3.4 per cent in February with food and energy prices driving the CPI rate down
Jeremy Hunt speaks to Rishi Sunak after presenting the annual budget statement in the House of Commons on March 6
Grant Fitzner, chief economist at the ONS, said: ‘Inflation eased in February to its lowest rate for nearly two-and-a-half years.
‘Food prices were the main driver of the fall, with prices almost unchanged this year compared with a large rise last year, while restaurant and cafe price rises also slowed.
‘These falls were only partially offset by price rises at the pump and a further increase in rental costs.’
In response to fresh inflation figures, 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.’
Shadow chancellor Rachel Reeves said ‘prices are still high’ despite the latest fall in the rate of inflation.
‘After fourteen years of chaos and uncertainty under the Conservatives working people are worse off,’ she said.
‘Prices are still high, the tax burden is the highest it has been in seventy years and mortgage payments are going up.
‘Now Rishi Sunak is putting forward a reckless £46 billion unfunded tax plan to abolish National Insurance that would risk crashing the economy and re-running the disastrous Liz Truss experiment.
‘Britain cannot afford another five years of this failed Conservative government. It’s time for change and it’s time for Rishi Sunak to set the date for the election.’
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said: ‘This notable decline is further evidence that the UK is fast approaching the finish line in its battle against surging inflation.’
Nen Thompson, deputy chief executive at Mortgage Advice Bureau, said: ‘Inflation in February being just 1.4 points above the Bank of England’s 2 per cent target could be the starting gun we’ve been waiting for, in terms of getting clearer visibility on exactly when base rate may start at last to come down.
Meanwhile Britain’s economic growth rate could come close to US levels, the Chancellor predicted ahead of the publication of the latest inflation figures.
In an upbeat assessment of the economy, Jeremy Hunt said it was ‘absolutely possible’ the UK could grow faster than Europe.
US GDP grew by 3.2 per cent in the last quarter of 2023, figures show, while the UK economy shrank by 0.3 per cent. Eurozone economic growth was flat in the same period.
The US economy defied recession fears, helped by an increase in interest rates to tame inflation and a tight labour market which has kept wages high.
Appearing before peers on the Economic Affairs Committee this week, Mr Hunt spoke of efforts to raise productivity in the public and private sectors.
He said: ‘If you look at our policies to increase investment by the private sector with the full expensing tax break that we announced, if you look at our nurturing of the technology sector which I think is going to be a great opportunity for the UK going forward.
‘It’s absolutely possible to get our economic growth rate healthily closer to US levels of growth compared to continental European levels of growth.’
This is a breaking news story. More to follow.
