Inflation falls as pressures from Brexit-hit pound ease

Inflation falls as pressures from Brexit-hit pound ease

Inflation jumped in Britain after the decision by voters in June 2016 to leave the European Union hammered the value of the pound and pushed up the cost of imports.

Phil Gooding, ONS statistician, said: "A small fall in petrol prices alongside food prices rising more slowly than a year ago helped pull down inflation, as numerous early 2017 price increases due to the previous depreciation of the pound have started to work through the system".

Inflation cooled in February as the impact of the Brexit-hit pound on everyday prices began to "work through the system".

Tuesday's data, due out at 09:30 London time, are crucial to the market's perception of United Kingdom inflation pressures.

United Kingdom transport prices dragged on the cost of living in February, securing a smaller month-on-month rise of 0.5% in contrast to a 1.2% jump previous year.

Stats SA & Bloomberg
Stats SA & Bloomberg

However, the weaker than expected increase in prices is unlikely to cause a rethink by the Bank of England which has said interest rates are likely to need to rise more than it previously thought.

Petrol prices dropped by 0.2p per litre to 120.8 per litre on the month, while diesel slipped by 0.1p per litre to 124.4p per litre.

Despite the fall in inflation, many households are still feeling pressure in their budgets.

Senior economist at the Ulster University Economic Policy Centre, Esmond Birnie said the latest inflation figures suggest a move towards the Bank of England's CPI target of 2 per cent.

The Office for National Statistics (ONS) will publish the latest pay growth figures tomorrow.

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And the situation could improve further this year, according to the Bank of England.

The Pound was bid higher during early trading in London Tuesday as markets positioned for the February volley of United Kingdom inflation figures, which are expected to show domestic price pressures in retreat.

On a month-on-month basis, inflation rose to 0.8 percent in February from 0.3 percent in January.

'Even if interest rates do start to rise, any progress is likely to be slow and there is a long way to go before savers will see returns that even break even with inflation'.

Food prices were also applying downward pressure, lifting 0.1 per cent between January and February in contrast to a 0.8 per cent rise the year before.

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"As a result, we still think that the MPC will raise interest rates... in May", they added.

In the contrary, Luigi Marinus, portfolio manager at PPS Investments said, "This relatively low level of inflation will put pressure on the Reserve Bank to cut interest rates in their next meeting".

"Forecasters were expecting price increases to ease back this year".

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