- CPI fell from 3% in January to 2.8% in February
- Clothing price falls helped mitigate the rise in alcohol duty
- Bill increases due to hit households in ‘Awful April’ are expected to turn the path of inflation back around
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK inflation figures:
“Anyone who has opened one of those delightful envelopes containing information about how much your water bill, your broadband costs and your council tax are set to rise by in April will have already forgotten that things felt a little lighter in February.
“Energy prices are also due to increase as the price cap edges up, though many households will have grabbed onto fixed tariff deals which will help them smooth out their household’s inflationary journey.
“This dip in inflation was slightly deeper than had been expected by economists, but it’s hard to get excited about one month’s data when we’re all hyper aware that things are about to get more difficult once again. In many cases wage increases will help offset the price hikes hurtling our way, as will the uprating in pensions and benefits, though in most cases those extra pennies have probably already been spent.
“The fall in the price of women’s clothing is only really helpful if you needed to update your spring wardrobe. Meanwhile food inflation held steady and as the duty on non-draught alcohol jumped up the price of our favourite tipple became more expensive.
“The big question on many homeowners or would-be homeowners’ minds will be whether the Bank of England cuts rates in May and how far they might fall by the end of the year. Expectation of a May cut has edged up slightly this morning, but MPC members have a lot to consider, balancing the need to boost a stagnant economy with nudging inflation back towards target at a time global trade concerns are prevalent.
“Today’s insight from the OBR into how lacklustre the UK economy is looking will have to be weighed along with the expectation that many businesses will feel they have no choice but to put up prices once those increased labour costs hit the books.”
