(Photographer: Brendon Thorne/Bloomberg via Getty Images)
Inflation hit 2.8 per cent in the year to February, pointing to a fragile UK economy as Chancellor Rachel Reeves prepares to deliver her Spring Statement this afternoon.
The Bank of England last week held interest rates at 4.5 per cent as inflation has remained high amid escalating trade tensions and incoming tax rises.
Now the Office for National Statistics (ONS) has revealed that the annual rate of price growth was lower than the rate of three per cent seen in January.
Most analysts slightly overestimated inflation for the month, saying that Consumer Prices Index (CPI) inflation would come in at 2.9 per cent in February.
“Inflation eased in February. Clothing prices, particularly for women’s clothes, was the biggest driver for this month’s fall,” Grant Fitzner, chief economist at the ONS, said.
“This was only partially offset by small increases, for example, from alcoholic drinks.”
The latest data by the ONS is nevertheless unlikely to calm members on the Monetary Policy Committee (MPC) at the Bank of England who are fearful about increasing price pressures brought by tax rises and a possible tariffs.
The research company Pantheon Macroeconomics forecasts that inflation could spike next month and reach 3.5 per cent.
In March, the Bank stuck by its prediction that inflation would hit a peak of 3.75 per cent this year as an interest rate cut in May is under question.
The OBR is set to release its forecasts for price growth after Reeves delivers her Spring Statement in Parliament later today.
The fiscal watchdog previously said in October that inflation would hit a peak of 2.7 per cent this year.
Inflation hit a high of 11.1 per cent in October 2022 and has steadily fallen.
But with inflation figures still remaining higher than the Bank’s two per cent target, the Monetary Policy Committee (MPC) are unlikely to move quickly to lower interest rates.
Trump’s tariffs on aluminium and steel, which are set to come into effect from April 2, are expected to rattle prices and force firms to lift prices.
The ONS has separately come under scrutiny over its handling of data and information.
The statistics body has had to postpone releases and revise its own figures.
Internal emails also showed that the sample size for one estimate “collapsed to only five individuals”, a report by the Financial Times said.
It recently revised the list of items in the basket of goods, which is used to measure inflation, as it included VR headsets and sliders and kicked off DVDs and minced turkey.
