Get all your news in one place.
100’s of premium titles.
One app.
Start reading
The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

UK inflation falls to 3.4%, but rents rise at record pace; HMRC halts plans to turn off tax helpline over summer – as it happened

Inflation United Kingdom United States The Bank of England
Supermarket staff at work in London.
Supermarket staff at work in London – food inflation eased last month Photograph: Andy Rain/EPA

Despite the drop in inflation to 3.4% this morning, the UK still has a higher inflation rate than other major economies.

Prices are rising faster here than in the US, where the US consumer prices index rose by 3.2% in the year to February. In the eurozone, inflation was just 2.6%.

This chart from the ONS shows how inflation has dropped sharply across Europe and the US since its peak in autumn 2022 (which also undermines the government’s efforts to take the credit today):

A woman who was accused of converting bitcoin into cash and property to help hide the proceeds of a £5bn fraud was convicted of one count of money laundering this week, after a trial in a London court.

Reuters has the details:

Prosecutors said Wen Jian helped hide the source of money allegedly stolen from nearly 130,000 Chinese investors in fraudulent wealth schemes between 2014 and 2017.

She was not alleged to have been involved in the underlying fraud, which prosecutors said was masterminded by a woman known to Wen as Zhang Yadi, whose real name is Qian Zhimin.

As part of their investigation, British police seized wallets holding more than 61,000 bitcoin – making it one of the largest cryptocurrency seizures by law enforcement worldwide.

The 61,000 bitcoin was worth around £1.4bn when police gained access in 2021, prosecutors said during Wen’s trial. It is now worth over £3bn.

Wen had denied three counts of money laundering. She was found guilty by jurors of one count on Monday, with the jury unable to reach a verdict on two other counts.

UK regulator proposes further cuts to Heathrow charges

Back in the transport sector, the aviation regulator has reignited the long-running row between Heathrow and its airlines over how much the airport can charge in take-off and landing fees.

The Civil Aviation Authority said this morning it could lower by 6% the proposed cap on passenger charges paid by airlines for 2025 and 2026, following a reassessment.

The CAA is proposing that per-passenger charges are cut by roughly 6%, or £1.52 to £23.72 in 2025 and by £1.58 in 2026 to £23.70. Previously it had said the charge per passenger should be £25.43 in 2024, £25.24 in 2025 and £25.28 in 2026.

Heathrow had already been disappointed by the original charges – it had pushed for an increase to more than £40 a passenger, up from £31.57 in 2023.

The airport says:

“We will review the impact of the CAA’s latest proposals and respond to the consultation in due course.”

In the markets, shares in luxury goods group Kering have dropped over 13% after it issued a profits warning as demand for its leading brand Gucci dries up in China.

The Paris-based company said like-for-like sales in the first quarter would drop by 10% year on year, while sales at Gucci were expected to fall by nearly 20%.

“This performance primarily reflects a steeper sales drop at Gucci, notably in the Asia-Pacific region,” said Kering, whose other luxury names include Saint Laurent, Balenciaga and Alexander McQueen.

More here:

As well as two one-day strikes on London Underground(see earlier post), Aslef have also announced a programme of one-day rolling strikes affecting 16 train companies, as they push for a pay rise.

On Friday 5 April, Aslef members will walk out at Avanti West Coast, East Midlands Railway, West Midlands Trains, and CrossCountry.

On Saturday 6th April, they will strike at Chiltern, GWR, LNER, Northern, and TransPennine Trains on Saturday 6 April;

And on Monday 8th April, workers will hold industrial action at c2c, Greater Anglia, GTR Great Northern Thameslink, Southeastern, Southern/Gatwick Express, South Western Railway (main line and depot drivers), and SWR Island Line.

Aslef general secretary Mick Whelan says train drivers are determined to get a fair pay rise:

‘Last month, when we announced renewed mandates for industrial action, because, under the Tories’ draconian anti-union laws, we have to ballot our members every six months, we called on the train companies, and the government, to come to the table for meaningful talks to negotiate a new pay deal for train drivers who have not had an increase in salary since 2019.

‘Our members voted overwhelmingly – yet again – for strike action. Those votes show – yet again – a clear rejection by train drivers of the ridiculous offer put to us in April last year by the Rail Delivery Group which knew that offer would be rejected because a land grab for all the terms & conditions we have negotiated over the years would never be accepted by our members.

Updated

Over in the House of Commons, Treasury minister Nigel Huddleston has told MPs that the HMRC helpline will always be there for vulnerable and digitally-excluded taxpayers.

Huddleston said:

“HMRC helpline and web chat advisers will always be there for those taxpayers who need support because they are vulnerable, digitally excluded or have complex affairs. I recognise that such reassurances were not sufficiently clearly communicated yesterday.

“The pace of this change, of course, needs to match the public appetite for managing their tax affairs online.”

But… shadow Treasury minister James Murray asked “who on earth is running the Treasury?” following today’s “chaotic U-turn” to halt plans to shut HMRC’s self-assessment helpline for half the year.

Murray added:

“This morning a Treasury source said that ministers have halted this change immediately, implying that ministers were taken by surprise by HMRC’s announcement yesterday.

“So can the minister confirm whether any Treasury ministers had any involvement in the decision announced yesterday?”

Huddleston said that he “completely supports” the move to online services.

Full story: HMRC halts plan to close tax helpline for six months a year

Here’s our full story on the tax helpline about-turn:

Parliament’s Treasury Committee has also welcomed HMRC’s u-turn, saying:

“The Treasury Committee is extremely pleased to see that common sense has prevailed.

“We welcome the decision to reverse yesterday’s ill-advised announcement. While we do not oppose expansion of digital services for those who want to use them, we remain entirely unconvinced that HMRC is adequately prepared to impose such a significant change in how it serves taxpayers.

“Planned changes to the operation of HMRC’s phonelines have been mismanaged from the beginning. Questions still remain over the extent to which the department are prioritising its own needs over those of law-abiding and vulnerable taxpayers.

“We will continue to engage with HMRC on this issue.”

Boeing warns of cash burn amid 737-Max crisis

Aeroplane manufacturer Boeing has admitted this morning that it will burn through more cash than expected this quarter, as it grapples with regulatory scrutiny and slower output of its 737 Max jetliner.

Following the January mid-air accident, in which a door panel blew out mid-flight, Boeing now expects to cash outflows to hit $4bn-$4.5bn in the first quarter of 2024, higher than forecast in January.

Brian West, Boeing’s chief financial officer, also told a Bank of America conference in London today that a plan to reach a $10bn cash flow target by 2025-2026 would also take longer.

West explained:

“We’re not at the moment where we can manage the near term for these financial outcomes because of the work at hand around stability.

Our expectation is that we’ll get more predictable and better positioned, but it will take time.”

West also revealed that margins at Boeing’s commercial aircraft business will be negative, by around 20%, in the first quarter as the company pays out compensation for the early January fuselage failure, Bloomberg reports.

While margins will improve for the year, they will remain negative for 2024, he added.

Although UK food inflation slowed last month, to 5% per year, olive oil inflation was a clear outlier.

Olive oil prices were 38.9% higher than a year ago in February, the highest inflation rate of any food product in the inflation basket.

Gareth Redmond-King, head of International Programme at the Energy and Climate Intelligence Unit (ECIU), says:

“Olive oil has been something of a canary in the mine when it comes to food supplies and prices. Southern Europe has suffered two extremely hot summers in a row, as well as record temperatures through winter.

The heat, drought and fires have been devastating for many farmers in the areas worst affected, and in Spain, Italy and Greece, that includes olive growers. 80% of the UK’s olive oil comes from the Mediterranean, and prices of olive oil in the UK have risen by a staggering 96% over the last two years, as harvests have suffered and supplies have become tight.

In 2023, we spent nearly £300m on olive oil from the region - around £50m more than in 2022, but to buy 9m kg less. In Spain, prices have gone up so much that olive oil is currently one of the most shoplifted products from supermarkets.

Small firms will definitely be relieved that the drastic reduction in HMRC’s helpline opening hours has been paused today, says Tina McKenzie, policy chair at the Federation of Small Businesses:

We are very glad that HMRC has listened to the chorus of dismay which greeted its initial announcement.

“While online services are a key part of the communications mix for the tax authority, sometimes there’s just no substitute for a real human on the end of a phone line who can listen, engage, and help untangle issues.

“It’s still also the case that people trying to get through to HMRC by phone face long delays, which is causing dissatisfaction to rise, and shows that the appetite for phone services is still high.

“We want to see HMRC investing in its helplines, to cut waiting times and ensure that small business owners with urgent tax queries can get through with minimal fuss to someone who can help.

“Before phone line cuts are considered, HMRC needs to build capacity in its digital services, as if those are improved – with real people online to offer help instead of chatbots – many small firms like to interact with the tax authority this way, as it can be more flexible and available out of hours.”

HMRC helpline changes halted after backlash

Newsflash: HM Revenue and Customs has halted its plan to scale back its telephone helplines, following a loud backlash yesterday.

HMRC says the plan – which included turning off its self-assessment helpline for six months a year, and cutting back other services, would be halted while it engages with its stakeholders about how to ensure all taxpayers’ needs are met.

The plan was part of HMRC’s attempt to move more people onto its online services, but was heavily criticised yesterday; the Chartered Institute of Taxation called the decision “misguided”, while Conservative MP Harriett Baldwin said it was a “great shame”.

Today, HMRC chief executive Jim Harra says the tax authority has listened to feedback.

Explaining today’s sharp u-turn, Harra says:

Making best use of online services allows HMRC to help more taxpayers and get the most out of every pound of taxpayers’ money by boosting productivity.

Our helpline and webchat advisers will always be there for those taxpayers who need support because they are vulnerable, digitally excluded or have complex affairs.

However the pace of this change needs to match the public appetite for managing their tax affairs online.

We’ve listened to the feedback and we’re halting the helpline changes as we recognise more needs to be done to ensure all taxpayers’ needs are met, whilst also encouraging them to transition to online services.

The Federation of Small Businesses has welcomed the decision to halt the “ridiculous” plan:

Earlier this morning the Telegraph reported that chancellor Jeremy Hunt had ordered HMRC to scrap its plans to close its phone lines over the summer.

Updated

London Underground drivers to stage two 24-hour strikes

Newsflash: Londoners are facing more industrial action on the tube in the next two months.

Train drivers on the London Underground will take strike action on April 8 and May 4 in a long-running dispute over working conditions, the ASLEF trade union has announced.

ASLEF says the train network had failed to give assurances over changes to their working terms and conditions.

Finn Brennan, the union’s organiser on London Underground, explains:

“Despite a previous commitment to withdraw plans for massive changes to drivers’ working conditions, London Underground management has established a full-time team of managers preparing to impose their plans.

“They want drivers to work longer shifts, spending up to 25% more time in the cab, and to remove all current working agreements in the name of flexibility and efficiency.

“Everyone knows what these management buzz words really mean. It’s about getting people to work harder and longer for less.”

Investors have added to their bets on Bank of England interest rate cuts later this year, Reuters reports, after inflation fell to its lowest in nearly two and a half years.

They explain:

Interest rate futures were pricing a roughly 63% chance that the BoE will cut Bank Rate to 5.0% from 5.25% - its highest since 2008 - at its June meeting, up from about 58% before the inflation data. They were fully pricing in a 25 basis-point cut in August.

Greggs; IT problem solved

Just in: Bakery chain Greggs says it has fixed the IT problem that prevented customers paying for their goods by card.

Greggs also apologises for the disruption, saying:

“We have now resolved the technical issue that affected tills in some of our shops earlier this morning. The majority of shops affected are now able to take card and cash payments again and we expect the issue to be fully resolved shortly.

We apologise for the inconvenience this may have caused to our customers.”

Analysis: The fight against UK inflation is being won – but when will interest rates be cut?

The battle against inflation is being won – and it is being won slightly more quickly than economists expected, our economics editor Larry Elliott writes:

Prices are still going up but the tide has turned. Unless something sudden and unexpected happens, the annual increase in the cost of living will be below the government’s 2% target within months.

Those are the clear messages from the latest inflation data from the Office for National Statistics (ONS). What is less clear is when the Bank of England will start cutting interest rates in response.

The short answer to that question is that a move will not come on Thursday, with Threadneedle Street’s monetary policy committee (MPC) wanting further evidence before acting.

Here’s Larry’s full analysis:

On the record jump in UK rents last month, ONS deputy director for prices Matt Corder says:

“Today we’ve published our first set of new rents figures, which utilise more data than before, allowing us to show both rental price levels and growth on a comparable basis, right down to local authority area.

“These new data show that UK rental prices continued to grow strongly in the year to February, at their highest annual rate since records began in 2015.

“Brent saw the highest annual rental growth of all local areas and Melton saw the lowest, while rental prices were highest in Kensington & Chelsea and lowest in Dumfries & Galloway.

“Average UK house prices continued to fall, albeit at a slower annual rate than seen recently. Indeed, Scotland’s average house prices rose at their fastest annual rate for more than a year.”

Emma Fildes, property agent at Brick Weaver, says a ‘seesaw effect’ is in play – as sales prices for houses falls (amid weaker demand from buyers) rents rise (as more people seek tenancies).

Here’s our news story on the IT gremlins at Greggs:

Intel wins nearly $20bn from Biden administration to boost US chip output

In the technology sector, chip giant Intel has secured nearly $20bn in grants and loans from the US government.

It’s the Biden administration’s largest outlay so far to subsidize leading-edge chip production, as the White House tries to strengthen its domestic semiconductor production.

President Biden is expected to annouce that Intel will receive $8.5bn in grants and up to $11bn in loans when he visits Arizona today.

Some of the funding to be used to build two new factories and modernize an existing one, Reuters reports.

US Secretary of Commerce Gina Raimondo told reporters this is “a huge deal”, Fortune reports, adding:

“It means bleeding-edge semiconductors made in the USA, keeping the USA in the driver’s seat of innovation.”

Greggs stores in cities including London, Manchester, Cardiff and Glasgow have reportedly been hit by the technical issues preventing them from accepting payments, PA Media reports.

Others asked customers to place orders outside using the Greggs mobile app before food could be given to them, they add.

UK rents climb by fastest rate since at least 2015

Newsflash: UK tenants have been hit by soaring rents this year.

The average UK private rent increased by 9.0% in the 12 months to February, new data from the Office for National Statistics shows.

That’s up from 8.5% in January 2024, and is the highest rate since the data series began in January 2015.

The ONS says private rent inflation was highest in London ( at 10.6%) and lowest in the North East (at 5.7%).

Across the country, average monthly rents increased to £1,276 (up 8.8%) in England in the 12 months to February, to £723 (9.0%) in Wales and £944 (10.9%) in Scotland.

The average private rent was highest in Kensington and Chelsea (£3,248) and lowest in Dumfries and Galloway (£472).

The ONS also reports that average UK house prices fell by 0.6% in the 12 months to January 2024, to £282,000, up from a 2.2% drop in the year to December.

Another report of tech problems at Greggs today:

Greggs stores hit by IT problem

Newsflash: Bakery chain Greggs has become the latest UK chain to be hit by IT problems.

Several Greggs customers have reported problems making payments this morning, or that their local store is closed.

Greggs says it is “experiencing issues accepting payments”, Sky News says.

In a statement, the bakery chain added:

“We are working to resolve this as soon as possible.”

Last week, McDonald’s restaurants in multiple countries including the UK and Australia were hit by a “technology outage”.

And both Sainsbury’s and Tesco experienced technical issues that disrupted supermarket deliveries last week.

The pound has slipped against the US dollar this morning, after inflation fell faster than expected.

Sterling is down 0.2% at just below $1.27, which would be its lowest closing level in two weeks.

The Bank of England isn’t expected to cut interest rates as soon as this month, though.

It will announce its latest decision at noon on Thursday, and the money markets indicate there’s a 97% chance that the BoE leaves rates on hold at 5.25%.

The UK’s “disinflationary tailwind” should allow the Bank of England to cut interest rates this year, explains Charles Hepworth, investment director at GAM Investments:

“Consumer inflation in the UK continues its slow descent towards the 2% base camp, recording a slightly quicker than expected fall to 3.4% in February from the 4% level in January.

Coupled with goods inflation slowing we also saw producer price input inflation fall more than expected, declining 0.4% over the month. This should help translate into additional inflation slowing effects in the months ahead. This disinflationary tailwind will encourage market expectations of rate cuts coming this summer and market forecasts expect three 0.25% cuts for the year in total. This is likely the best a government pushing for an autumn election could hope for.”

Explaining February’s drop in inflation, ONS Chief Economist Grant Fitzner says:

“Inflation eased in February to its lowest rate for nearly two and half years.

“Food prices were the main driver of the fall, with prices almost unchanged this year compared with a large rise last year, while restaurant and café price rises also slowed.

“These falls were only partially offset by price rises at the pump and a further increase in rental costs.”

Another encouraging sign for inflation is that UK factories paid less for their raw materials last month.

The latest producer price inflation report, also released this morning, showed that factory input prices fell by 0.4% on a monthly basis in February – a sign that inflationary pressures eased.

But producers still raised their prices, with output prices rising by 0.3% in February.

The ONS adds:

  • Producer input prices fell by 2.7% in the year to February 2024, up from a revised fall of 2.8% in the year to January 2024.

  • Producer output (factory gate) prices rose by 0.4% in the year to February 2024, up from a revised fall of 0.3% in the year to January 2024.

Resolution: Fastest inflation fall in nearly half a century puts 2% target in sight

The fastest inflation fall in nearly half a century suggests UK is on track to hit two per cent target by April, says the Resolution Foundation.

They say the Bank of England will be encouraged that services inflation fell to 6.1% in February, as that is a gauge of domestic inflation.

James Smith, research director at the Resolution Foundation, says:

“The fastest fall in inflation for almost half a century will be welcome news for households – with food inflation falling to its lowest rate in two years – and the Bank of England, as inflation looks on track to hit its 2 per cent target in April.”

“Services inflation also continues to fall which, coupled with falling nominal wage growth, should give monetary policy makers more confidence that wage pressures on inflation are starting to ease.”

Update: this is based on the 7 percentage point fall in the CPI over the last 12 months – from 10.4% in February 2023 to 3.4% last monthe – the largest 12-month period since September 1978.

Updated

Table: CPI annual and monthly inflation rates by division

Digging into today’s CPI report, we can see that food and non-alcoholic beverage inflation slowed sharply last month, to 5% from 6.9%.

Alcohol and tobacco prices rose at a slower pace too, bringing their annual inflation rate down to 11.9% from 12.4%.

A smaller monthly rise in prices meant that Clothing and footwear inflation eased to 5% from 5.6% in January, while furnutire nad household goods prices were flat year-on-year.

This table has more details:

EY ITEM Club: inflation could fall below 2% target in April

February’s sharp fall in inflation was largely due to base effects, following large rises in food and services prices between January and February last year.

Those base effects, and the drop in energy bills this year, means inflation could fall below the Bank of England’s 2% target soon.

Martin Beck, chief economic advisor to the EY ITEM Club, explains:

“Base effects will remain influential over the next couple of months and, along with a 12% fall in Ofgem’s energy price cap, this should mean inflation falls to, or below, the Bank of England’s 2% target in April.

Furthermore, although only a month of Ofgem’s new observation window has passed, lower wholesale gas prices point to another substantial fall in the energy price cap and household bills in July. So, there’s a good chance that inflation declines well below 2% in the second half of the year.

Updated

The financial markets are still expecting the Bank of England to cut interest rates three times this year, starting in the summer.

That would bring rates down to 4.5% by December, from 5.25% today.

Victoria Scholar, Head of Investment at interactive investor, tells us:

Inflation is certainly moving in the right direction, quicker than expected and is forecast to reach the 2% target in the months ahead. Global factors such as easing global supply chain pressures and cooling energy prices combined with higher interest rates from the Bank of England have helped price pressures retreat from a 40-year high seen in October 2022.

Markets are pricing in a longer wait for the first rate cut from the Bank of England than other central banks such as the US Federal Reserve with growing positive bets on the pound from hedge funds and traders reflecting this view.

UK rate futures markets are pointing to 71 basis points of rate cuts from the Bank of England by December, up very modestly from 67 basis points before today’s inflation data. Most economists anticipate the central bank will begin cutting in June.”

Today’s inflation report does not reflect the full impact of the cost of living squeeze,

Dr Sarah Cumbers, chief executive of the Royal Statistical Society, explains:

“While it’s good to see inflation coming down, we should remember that CPI was never intended to measure the impact of inflation on households.

“Its exclusion of interest payments such as mortgages and loans - and the greater weight it gives to higher spending households – means people’s experiences of inflation, particularly those on lower incomes, are not adequately reflected in the figures.

“I would encourage policymakers to take into account the Household Costs Indices, now published quarterly by ONS as the best way to understand the impact of inflation on different groups.”

The most recent Household Costs Indices, released last month, showed that households with a mortage had the highest inflation rate at the end of last year, followed by private renters, with outright owner occupiers experiencing the lowest rate.

Annual motor fuel inflation is negative for twelfth consecutive month

Today’s inflation report confirms that motor fuel prices picked up in February, but was still cheaper than a year ago (when energy costs were much higher).

The average price of petrol rose by 2.3p per litre between January and February to 142.2p per litre, down from 148p per litre in February 2023, the ONS says.

Diesel prices rose by 3p per litre in February to 151.3p per litre, down from 169.5p in February 2023.

So overall, motor fuel prices fell by 6.5% in the year to February 2024, compared with a fall of 9.2% in the year to January.

Rachel Reeves MP points out that prices are still high, at a time when households are also being hit by rising taxes and higher mortgage rates.

The shadow chancellor says:

“After fourteen years of chaos and uncertainty under the Conservatives working people are worse off. Prices are still high, the tax burden is the highest it has been in seventy years and mortgage payments are going up.

Now Rishi Sunak is putting forward a reckless £46 billion unfunded tax plan to abolish National Insurance that would risk crashing the economy and re-running the disastrous Liz Truss experiment.

Britain cannot afford another five years of this failed Conservative government. It’s time for change and it’s time for Rishi Sunak to set the date for the election.”

Full story: UK inflation falls to 3.4% in February to lowest level for two and a half years

UK inflation fell to 3.4% in February – the lowest level for two and a half years – according to official figures that show the annual rate of price rises starting to ease again after remaining unchanged the previous month.

The decline in the consumer prices index (CPI) from 4% in January will give a boost to Rishi Sunak, who has pledged to reduce inflation, and add to speculation that the Bank of England will cut interest rates in the summer.

Most economists had predicted that February’s headline figure from the Office for National Statistics (ONS) would drop to 3.5% – the lowest since September 2021, when it was 3.1%. A reduction in the rate of inflation does not mean that prices are falling, just that they are rising more slowly.

Investors are betting that inflation will tumble further through the spring months, reflecting the sharp decline in the price of natural gas since last year and a slowdown in food price rises.

More here.

Hunt: The plan is working

Chancellor Jeremy Hunt has claimed that today’s fall in inflation “sets the scene for better economic condition”.

Welcoming the drop in inflation to 3.4% in February, Hunt says:

“The plan is working.

“Inflation has not just fallen decisively but is forecast to hit the 2% target within months.

“This sets the scene for better economic conditions which could allow further progress on our ambition to boost growth and make work pay by bringing down national insurance as we work towards abolishing the double tax on work – but only if we can do so without increasing borrowing or cutting funding for public services.”

Politicians seem, curiously, keener to take responsibility for inflation when it is on the way down. Back in the Autumn Statement of 2022, Hunt told MPs that “The Office for Budget Responsibility confirms global factors are the primary cause of current inflation.”

Some of those global factors, such as high oil prices and supply chain disruption, have faded.

But also, inflation is an annual measure – today’s data is telling us that the cost of living is 3.4% higher than in February 2023, when it was 10.4% higher than February 2022….

Food inflation lowest since January 2022

The largest downward contributions to the monthly change in inflation came from food, and restaurants and cafes, the ONS says.

Today’s inflation report shows that prices for food and non-alcoholic beverages rose by 5.0% in the year to February 2024, down from 6.9% in January.

The February figure is the lowest annual rate since January 2022.

The ONS reports that the annual rates for most types of food product eased between January and February 2024, with the largest effect coming from bread and cereals.

It says:

Overall, prices for bread and cereals rose by 0.3% on the month, compared with a rise of 2.3% between January and February 2023. Prices of packs of cakes and some bread products (for example, white sliced loaves) fell between January and February this year but rose a year ago. The resulting annual rate for bread and cereals in February 2024 was 6.0%, the lowest observed since March 2022.

Other smaller downward effects came from classes such as meat, vegetables, and milk, cheese and eggs. Overall, the annual rate eased in 10 of the 11 food and non-alcoholic beverages classes with oils and fats the exception; its annual rate rising from 8.0% in January to 8.3% in February 2024.

Core inflation also falls

Underlying inflation also eased in February.

Core CPI (which excludes energy, food, alcohol and tobacco) rose by 4.5% in the 12 months to February 2024, down from 5.1% in January.

Goods inflation slowed from 1.8% to 1.1%, while the CPI services annual rate eased from 6.5% to 6.1%.

On a monthly basis, inflaion rose by 0.6% in February 2024, the Office for National Statistics reports.

That’s rather slower than the 1.1% rise in prices recorded in February 2023.

UK inflation falls to 3.4%

Newsflash: UK inflation has fallen to its lowest level in two and a half years.

The Consumer Price Index has slowed to 3.4% in February, down from January’s 4%, a sign that prices rose at a slower rate last month.

That’s the lowest since September 2021, and a slightly larger fall than the City expected, data from the Office for National Statistics shows.

Updated

Deutsche Bank’s chief UK economist, Sanjay Raja, is also expecting a substantial drop in inflation this morning.

Raja told clients:

We expect headline and core inflation to continue their descent.

Weaker food, goods and some services prices — combined with large negative base effects — should see inflation take a big step down in February.

We see headline CPI slowing to 3.4% y-o-y (Jan: 4%). Core CPI, we think, will drop to 4.5% y-o-y (Jan: 5.1%).

Those ‘base effects’ are the jump in prices a year ago, which pushed inflation over 10% in February 2023.

Economist Ellie Henderson of Investec predicts a sharp drop in inflation for February, as last year’s big rises in costs for non-alcoholic drinks and clothing and footwear were not repeated this year.

But, she points out there are still inflationary pressures, as fuel prices rose last month.

Henderson adds:

“There is also the risk that the disruption in the Red Sea resulted in higher input costs for producers in February, some of which could have been passed onto the consumer.

“There is also the potential that the extra health certificate requirements that were introduced at the start of the month for medium-and-high-risk plant and meat imports from the EU caused a material increase in consumer prices.”

Introduction: UK inflation report coming up

Good morning.

Eyes in the City of London, and Westminster, are on UK inflation, with the latest cost of living data due at 7am this morning.

Inflation is expected to have slowed last month; economists estimate the Consumer Price Index (CPI) will drop to 3.5% for February.

That would be the lowest in almost two-and-a-half years (since September 2021), and mean prices are rising at a slower rate than January, when annual inflation was 4%.

A drop in inflation could encourage the Bank of England to consider cutting interest rates in the coming months – as its mandate is to keep inflation sustainably at 2%.

Kyle Rodda, senior financial market analyst at capital.com, explains:

UK inflation data will be a precursor to tomorrow’s Bank of England meeting, with forecasters projecting a meaningful drop in prices last month.

Core inflation is expected to moderate to 4.6% from 5.1% in February, while headline is tipped to decline to 3.5% from 4%. Inflation in the UK has been more stubborn than other G10 economies, partly due to elevated wage growth and energy price shocks.

The dynamic means the markets are pricing in relatively fewer cuts from the Bank of England than other major central banks.

The government will also be hoping for a substantial drop in inflation, as it would bolster Rishi Sunak’s claim that “the economy is turning a corner”, after it fell into recession at the end of last year.

The agenda

  • 7am GMT: UK inflation report for February

  • 9.30am GMT: UK house price and rental index for January

  • 10.15am GMT: UK bank bosses to face questions from Treasury Committe

  • 11am GMT: US mortgage applications data

  • 3pm GMT: Eurozone consumer confidence report

  • 6pm GMT: US Federal Reserve sets interest rates

Updated

Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
How to watch new 'Making Manson' doc online - stream from anywhere
Watch "Making Manson" online from anywhere for the true crime story about the murders that shocked America plus new confessions of even more.
Tom’s Guide
Tom’s Guide
Nicole Kidman Breaks Silence On Viral Tom Cruise Divorce Celebration Meme: “I Know That Image!”
Nicole Kidman debunked the myth surrounding her famous meme image where she’s supposedly celebrating her divorce from Tom Cruise. The post Nicole Kidman Breaks Silence On Viral Tom Cruise Divorce Celebration Meme: “I Know That Image!” first appeared on Bored Panda.
Bored Panda
Bored Panda
"SNL" Domingo sketch goes off-screen
Hernández made an in-character appearance at Carpenter's LA concert, a gift for obsessively online people
Salon
Salon
Cher Considered Suicide While Trapped in "Loveless Marriage" With Sonny Bono
"I saw how easy it would be to step over the edge."
Marie Claire
Marie Claire
Cher reveals why her marriage to Gregg Allman lasted only nine days
Cher and the late singer tied the knot in 1975
The Independent UK
The Independent UK
Did Matty Healy Just Inadvertently Confirm Taylor Swift's "Guilty as Sin" Is About Him?
Very suspicious.
Marie Claire
Marie Claire
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.
Download on the AppStore Get it on Google Play