Inflation falls to 2.7%: ONS

CPIH, which the ONS uses as its headline measure and which includes owner occupiers’ housing costs, was 2.5% in February 2018, down from 2.7% in January 2018.

The largest downward contributions to the change in the rate came from transport and food prices, which rose by less than a year ago, while falling prices for accommodation services also had a downward effect.

Tom Stevenson, investment director for personal investing at Fidelity International, commented: “Inflation is easing from its recent peak of 3.1%. February’s reading of 2.7% was slightly lower than expectations and 2.5% for underlying inflation is in line with forecasts. As the post-referendum currency effect fell out of the year on year comparisons, price rises were always likely to ease back.

“Attention will turn now to the Bank of England’s rate-setting decision on Thursday. With inflation still above the Bank’s 2% target, we should expect the monetary policy committee to raise the base rate from its ‘emergency’ level in due course. This is unlikely to be this week but a May hike now looks odds on.

“Although the Bank now joins the Federal Reserve on a tightening bias, rate hikes will be lower and slower as long as the UK economy faces the uncertainty of the ongoing Brexit negotiations. The agreement of a 21 month transition this week is a step in the right direction but there remain many unanswered questions. Because of this, the Bank will stay cautious and the gap between US rates and those in the UK will widen."