Inflation came in below analysts’ expectations throughout February in some much-needed good news for the embattled high street.
According to the Office for National Statistics (ONS), the consumer price index measure of inflation dropped to 2.7 per cent in February, down from three per cent in January and below predictions of 2.8 per cent.
The slowdown has eased the pressure on the cost of living to the lowest level in seven months, largely due to a drop in food inflation.
Food price inflation slowed to 0.1 per cent between January and February, dropping significantly from the 0.8 per cent rise a year earlier.
This was helped in part due adverse weather conditions causing a drought last February, driving up the prices of vegetables.
However, this was offset by an increasing rise in clothing and footwear prices, rising 1.7 per cent compared to January, up from 1.2 per cent last year, driven by a rise in women’s shoes.
These figures have fueled economist’s speculations that inflation may have peaked as the initial cost pressure due to Brexit begin to fade.
“We’re now descending from the peak of inflation caused by the fall in the pound,” BRC’s head of insight and analytics Rachel Lund said.
“However, the fact remains that prices faced by consumers are still growing faster than wages, meaning shoppers’ budgets are still stretched and conditions for retailers will remain tough for the foreseeable future.”
“This month’s sharp fall puts inflation below the Bank of England’s forecast for Q1 as the expected pick-up in the service elements of the index (offsetting some of the reduction in currency impacts) is yet to show through. Today’s figures make an increase in interest rates in May a little less likely, but only a little.”
Head of the Bank of England Mark Carney had previously stated that to bring inflation back under its target of two per cent, it would need to raise interest rates “somewhat earlier and by a somewhat greater degree”.