In a positive economic development, the latest figures show that inflation in February dropped to 3.4%, down from 4% in January and moving closer to the Bank’s target of 2%. This decrease signifies the slowest increase in the cost of living since September 2021 when it stood at 3.1%. Inflation, which measures the rate at which prices rise over time, has been on a gradual decline since reaching its peak of 11.1% in October 2022, the highest rate in 40 years.
The Office for National Statistics attributed the main reason for the drop in inflation to food price inflation. Although prices are still rising, they are doing so at a slower pace than before. Most economists had predicted this decrease in inflation, leading to expectations that the Bank of England will cut interest rates later in the year. The latest figures come just before the Bank’s interest rate decision, which is anticipated to keep rates at 5.25%.
Grant Fitzner, the chief economist at the ONS, highlighted the significant drop in food price inflation, which contributed to the unexpected decrease in last month’s figure. He noted that there have been 11 consecutive monthly falls in food prices, indicating a relatively stable trend over the past nine months. Despite some price increases at the pump and in rental costs, the overall trend continues to show a downward trajectory. Economists are also projecting further drops in inflation, indicating a positive outlook for the country’s economic recovery.