Inflation expected to have fallen to fresh low in February

UK inflation is expected to have fallen to a fresh low of nearly two and a half years when official data for February is released.

Most economists expect the figures from the Office for National Statistics (ONS) to show that inflation fell to 3.5% in February – down from 4% in January and the lowest since September 2021, when it was 3.1%.

It comes ahead of the Bank of England’s latest interest rate decision tomorrow, with policymakers widely expected to keep rates on hold at 5.25%. But another steep fall in the Consumer Prices Index (CPI) is likely to reinforce expectations that the bank is moving closer to cutting rates later this year.

Ellie Henderson at Investec, which is pencilling in CPI at 3.6% for February, said the sharp drop in inflation is likely to come as last year’s big rises in costs for non-alcoholic drinks and clothing and footwear were not repeated this year.

She said: “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.”

She stressed that inflation will still be significantly higher than the Bank’s 2% target. Despite the falling inflation and economic woes, experts are expecting that only one of the Bank’s nine-strong rates setting committee to vote for a cut on Thursday. In February, only one of them, Swati Dhingra, voted to cut rates, two voted for a rise, but the rest said they should stay at 5.25%.