Inflation rate falls to 3.4%
The latest official figures from the Office for National Statistics (ONS) show that inflation fell to 3.4 per cent in February, from 3.6 per cent in the previous month, according to the Consumer Prices Index (CPI).
Using the Retail Prices Index (RIP) measurement, which includes housing costs such a mortgage interest and council tax, inflation fell to 3.7 per cent from 3.9 per cent.
The lower inflation figures reflect a reduction in domestic heating costs in February compared with a year ago, and continue a downward trend which started in September.
All six of the UK’s main energy companies have reduced their prices, while discounting on digital cameras and a 1.6 per fall in air fares also helped to lower the CPI rate of inflation in February.
The CPI rate is now at its lowest level since November 2010, but it is still above the Bank of England’s target of 2 per cent.
However, there is optimism that it could hit the target by the end of the year unless oil prices continue to rise.
Ongoing difficulties in Iran and Syria have prompted discussions between President Barack Obama and Prime Minister David Cameron about releasing strategic oil reserves to keep the price of oil down.
While the fall in inflation is good news for consumers, many will have noticed little effect on their spending power as ONS figures also revealed a fall in average earnings growth from 1.9 per cent to 1.4 per cent annually.
There was also good news on the economy earlier this month, when the National Institute of Economic and Social Research (NIESR) revealed that UK gross domestic product grew 0.1 percent in the three months to March.
In the previous three month period the economy contracted by 0.2 per cent.
In a statement, NIESR said: “At present the UK economy can best be described as ‘flat’.
“We expect the UK’s economic recovery to take hold in 2013.”