UK inflation slows by more than expected but prices remain high

UK inflation fell back by more than expected last month to the lowest level in more than two years as food price rises eased, official figures have shown.

The Office for National Statistics (ONS) said that Consumer Prices Index inflation stood at 3.4% in February – down from 4% in January and the lowest level since September 2021.

Most economists had been expecting inflation at 3.5% last month.

Inflation is now closer towards the Bank of England’s 2% target and came ahead of the latest interest rate decision today.

However, Labour and trade unions said many families are still facing a cost of living crisis after an almost 25% increase in costs since January 2022.

Policymakers are widely expected to keep rates on hold at 5.25%, but the steep fall in the CPI is likely to reinforce expectations that the Bank is moving closer to cutting rates later this year.

Grant Fitzner, chief economist at the ONS, said: “Inflation eased in

February to its lowest rate for nearly two-and-a-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 cafe price rises also slowed.

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

The data shows inflation finally resuming its retreat, having unexpectedly lifted in December and then remaining unchanged in January.

Experts said inflation is now likely to fall back below target in April or May, thanks to the scheduled 12% fall in the energy price cap on April 1.

Chancellor Jeremy Hunt said the inflation fall “sets the scene for better economic conditions”, with the UK last month revealed to have slipped into a recession at the end of 2023.

He said: “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.”

The ONS said it was not seeing any sign yet of an impact on consumer prices from the Red Sea disruption, following attacks from Houthi rebels on cargo ships going through the trade route. There had been fears that it could push up food costs, as well as prices on clothing and goods, in particular from Asia.

Shadow chancellor Rachel Reeves meanwhile said “prices are still high” despite the latest fall in the rate of inflation.

“After 14 years of chaos and uncertainty under the Conservatives working people are worse off,” she said. “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.

“Britain cannot afford another five years of this failed Conservative government. It’s time for change.”

AN iconic train that featured in several Harry Potter movies has been suspended amid safety regulation challenges with immediate effect.

The suspension of The Jacobite could cost up to £50 million in lost value, its operator has warned.

The “Hogwarts Express”, as it is unofficially known, has operated for more than 30 years under an exemption that allows it to run with hinged-door carriages on the main lines, which is typically not allowed.

The service – operated by West Coast Railways (WCR) – has now been suspended with immediate effect as it awaits a verdict from the Office of Rail and Road (ORR) on allowing it to continue operating in its current state.

A popular tourist attraction, The Jacobite runs between Mallaig and Fort William across the Glenfinnan Viaduct in the Highlands. James Shuttleworth, commercial manager of WCR, said: “The Jacobite service is enjoyed by thousands of customers every year. It boosts the local economies of Mallaig and Fort William and brings an estimated £20m into the UK’s tourism sector.

“If the ORR does not grant us a further exemption, we believe this could lead to up to £50m in lost value to both local and national communities.”

“We remain committed to working with the ORR to find a long-term solution which safeguards the future of heritage services on the main line.”

It is understood all passengers will be offered a full refund.