In February, inflation experienced a notable decline to 3.4%, down from January's 4%, moving closer to the Bank of England's target of 2%. This marks the slowest increase in the cost of
living since September 2021, when it reached 3.1%. Notably, inflation, which measures the rate of price increase over time, has been steadily decreasing since reaching its peak of 11.1% in October 2022, the highest in four decades.
The Office for National Statistics (ONS) attributes the main cause of this decline to food price inflation. It's important to note that while prices aren't dropping, they are rising at a slower rate compared to before. This anticipated drop aligns with the expectations of most economists, who foresee a potential interest rate cut by the Bank of England later this year.
Ahead of the Bank's interest rate decision, which is anticipated to maintain rates at 5.25%, the decrease in inflation presents a positive development for the government. However, this comes after official data last month confirmed the UK's entry into a recession at the end of the previous year.
Grant Fitzner, the chief economist at the ONS, highlights the significant drop in last month's figure, primarily attributed to the decline in food price inflation, which decreased from 6.9% to 5%. He notes that this marks 11 consecutive monthly decreases, with food prices remaining relatively stable over the past nine months.
While there have been increases in prices at the pump and rental costs, they were only able to partially offset the overall decline. Fitzner emphasizes that despite prices still being higher than they were a year or two ago, the rate of inflation has noticeably decreased.
Speculation regarding potential price impacts due to disruptions in the Red Sea did not materialize as expected. This is largely due to the increased rate of sterling and the UK's improved ability to pay for imports, according to Fitzner.
Overall, the decline in inflation can be attributed to lower food and eating out costs, signaling a positive trend in the economy. Photo by Mtaylor848, Wikimedia commons.