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

Cornelia Mascio
Marzo 20, 2018

The figure was slightly below the median forecast of 2.8 per cent in a Reuters poll of economists.

Though inflation has eased back, many economists think that the Bank of England will raise interest rates again in May, especially after the government secured the outlines of a transition deal for Britain after the country leaves the European Union in March next year.

"The UK recovery is now almost nine years old, and yet our official interest rate is exactly where it was nine years ago".

"The meeting today between the EU's chief Brexit negotiator (Michel Barnier) and his United Kingdom counterpart, David Davis, could provide the clearest signal over whether a transition deal is likely to be agreed this week".

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.

The ONS figures published on Tuesday suggested less pressure in the pipeline for consumer prices.

Prices jumped in February of last year, taking some of the steam out of the latest year-on-year comparisons, the Office for National Statistics said.

Manufacturers increased the prices they charged by the least since November 2016 as the cost of their raw materials - many of them imported - rose by 3.4 per cent, way down from a peak annual increase of almost 20 per cent in January a year ago.

Furthermore, sterling has strengthened in recent months on signs that Britain will avoid a disorderly Brexit.

Analysts do not expect the BoE to serve up any surprises, but will be looking at both consumer price inflation data, due on Tuesday, and wages data due on Wednesday for any sign of inflationary pressures building in the economy.

Petrol prices fell on the month and food prices rose more slowly than in February 2017, he said.

There are hopes that wages will soon start to rise by more than prices, encouraging household spending.

Also pushing down on inflation was a slower rise in the price of ferry tickets which previous year were monitored over Valentine's Day when many people could have been taking breaks, the ONS said.

Later this week the Bank of England monetary policy meeting is expected to keep rates on hold but prepare the market for a possible rate hike in May, an increase it has signalled is contingent on a transition deal being agreed.

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

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