United Kingdom inflation slows in Feb as Brexit hit to pound fades

United Kingdom inflation slows in Feb as Brexit hit to pound fades

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The consumer price index including occupiers' housing costs (CPIH) was 2.5 percent in February, compared to 2.7 percent in January. The pound fell by 15 per cent following the Brexit vote in June 2016 and this led to a rise in the cost of...

Paul Hollingsworth, senior United Kingdom economist at Capital Economics, said the fall in inflation "confirms that we have now reached a turning point" but that this did not diminish the case for a rate hike in May.

However, economists and the Bank of England believe inflation's upward march has run its course and will start to unwind over the coming months.

The fall in food price growth was partly down to a shortage of salad and vegetables a year ago when bad weather hit crops in southern Mediterranean countries, the ONS said. He argued that the committee increasingly looks to wage growth which is expected to have picked up, rather than just headline inflation, to inform its decision making.

"We expect CPI inflation to fall to 2.1% in Q4, touching 2.0% in one month of the quarter, clearly undershooting the MPC's 2.4% forecast and ensuring that it raises Bank rate only once this year".

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The regional data for England indicates that the South West experienced the greatest monthly price rise, up by 1.4%.

It increased interest rates in November for the first time in more than a decade.

Andrew Sentance, senior economic adviser at PwC, said it was "not a surprise" that inflation was falling back and there was "little reason" for the Bank to hold back from hiking rates.

The Bank is more upbeat on the growth outlook, pencilling in 1.8% expansion this year, although it is not so cheery on the path of inflation.

Investors saw the softening of inflation as unlikely to challenge the BoE's message from last month that interest rates will probably need to rise more quickly than it had previously thought.

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