United Kingdom inflation slows in February as Brexit's impact on pound fades

UK Inflation Slows More Than Expected as Pound Effect Fades

Official data published on Tuesday showed consumer prices rose by an annual 2.7 percent last month, the weakest increase since July of previous year.

"Hotel prices also fell and the cost of ferry tickets rose more slowly than a year ago, when prices were collected on Valentine's Day when many people could have been taking mini-breaks", he said.

The UK consumer price inflation slowed down in February 2018, following the dropping oil prices and slower food expenditure growth.

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 lower inflation figures released today does not necessarily mean lower interest rates, said Annabel Bishop, a chief economist at Investec told Xinhua on Tuesday.

Core inflation, which excludes the prices of food, non-alcoholic beverages, petrol and energy, was unchanged at 4.1 percent year-on-year in February, while on a month-on-month basis it quickened to 1.1 percent from 0.2 percent previously.

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

Slower growth from CPI eases the pressure on the Bank of England, which is widely expected to hike interest rates beyond 0.5% in May.

More news: U.S. trade groups urge Trump to stop planned China tariffs

The Office for National Statistics (ONS) will publish the latest pay growth figures tomorrow. It expects wages to grow more quickly than inflation.

Food prices rose by 0.1% between January and February, compared with a 0.8% rise the year before.

The Brexit-driven fall in the pound pushed up inflation over the last 18 months, but those effects are now slowing, and prices are rising more slowly.

"We are increasing the National Living Wage which is already helping the lowest earners see their pay rise by nearly 7 per cent above inflation". This perception will be key to expectations for the next Bank of England interest rate rise and the performance of Pound Sterling in the short term.

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

"We think that the MPC will refrain from ratcheting up its guidance and won't clearly signal an imminent rate rise in the minutes of Thursday's meeting, prompting markets to reassess their view that the chances of a May rate hike are as high as 80%".

There are signs that the Brexit hit to prices has peaked, however, though the BoE expects a residual impact to last years.

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