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20 March 2018

Relief as inflation falls to 2.7%

UK inflation eased to 2.7% during February, according to figures released by the Office for National Statistics.

The headline inflation rate, Consumer Prices Index (CPI), fell from January’s reading of 3% to 2.7%, while the Retail Prices Index (RPI) fell from its 4% reading in January to 3.6% in February. 

Naeem Siddique, Investment Manager, said:

 “Year over year, there have been lower price increases for transport and food, which were the main contributors to the fall in inflation. Sterling’s appreciation from 12 months previously kept a lid on the rising oil price, which is priced in US Dollars, and news of potential food shortages from Southern Europe last year were not seen this year. The seasonal rise in clothing and footwear following the January sales was larger than in 2017, with women’s footwear the largest contributor to rising prices. The weather may well have contributed, with the recent cold snap coming at the end of February, and retailers passing on rising costs to consumers. Package holidays are set be higher than last year, while TV and electronics have seen prices fall.

“It may well be we have already seen inflation peak, and the threat of a rising interest rate may hold back further price rises. However, with rising labour costs - the minimum wage is set to rise in April - we could see further cost inflation passed on to consumers. The Bank of England may stick to one interest rate rise this year if we see inflation fall. When you factor in some Sterling strength, which no one believes can last, we may well see a continuation of a ‘wait and see’ policy from the Governor. He will be breathing a sigh of relief for now with the latest inflation readings.”
 
Relief as inflation falls to 2.7%
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