UK inflation falls to 3% in February

| March 23, 2010 | 0 Comments

The Office for National Statistics (ONS) has today announced Consumer Price Inflation (CPI) slowed to 3% in February - slightly more than the 3.1% expected by analysts.

It is hoped today’s figures from the ONS will reinforce that inflation is on a downward trend after reaching a 14-month high of 3.5% in January.

Inflation has been rising over the last few months, largely driven by higher petrol costs and the effects of the reduction in the standard rate of VAT.

Bank of England Governor, Mervyn King, has already warned that inflation will rise but recently had to write to Chancellor, Alistair Darling, to explain why inflation had exceeded the 2% target.

The Bank recently predicted that inflation will fall to 1.8% towards the end of the year, because the economy remains fragile as it continues to recover from the recession.

Meanwhile, Retail Price Inflation (RPI), which includes mortgage costs and is used as the basis for many wage deals, remained unchanged at 3.7% in February, this was in line with forecasts.

However, there were concerns for inflation which were revealed in the minutes from the Bank of England’s March meeting.

The minutes said: “Members drew different inferences about how the balance of risks to inflation was evolving. Some members considered that the upside risks to inflation had increased slightly over the month; others felt that the balance of risks had not changed materially.”

According to the minutes, the MPC believes that it “was increasingly likely” that CPI inflation will “remain well above” the target over the months ahead.

It added the MPC would keep under “close review the extent to which these shocks to the price level were feeding through into inflation expectations”.

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