Sterling dips after United Kingdom inflation slows more than expected

Screen Shot 2018 03 20

A Reuters poll of analysts had expected year-on-year consumer price inflation for February to drop to 2.8 percent from 3 percent the previous month.

"Inflation is still above target after all, and the Bank of England would love to build up some firepower to deploy in the event of an economic slowdown".

Core inflation, which excludes the prices of food, non-alcoholic beverages, petrol and energy, was unchanged at 4.1 percent year-on-year in February, while on a month-on-month basis it quickened to 1.1 percent from 0.2 percent previously.

The Brexit-driven fall in the pound pushed up inflation over the last 18 months, but those effects are now slowing, and prices are rising more slowly. Economists had forecast inflation to slow to 4.1 percent.

Cape Town - South Africa's headline consumer price inflation (CPI) eased to 4.0% in February, down from 4.4% in January 2018, according to official figures.

Sterling's slide since the Brexit vote has ratcheted up the pressure on household spending power, climbing from 0.6 per cent shortly after the European Union referendum result to a near six-year high of 3.1 per cent in November 2017.

The BoE expects wages to grow more quickly than inflation later this year.

Petrol prices dropped by 0.2p per litre to 120.8 per litre on the month, while diesel slipped by 0.1p per litre to 124.4p per litre.

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The fall in food price growth was partly down to a shortage of salad and vegetables a year ago when bad weather hit crops in southern Mediterranean countries, the ONS said.

The main rise in the cost of living came from clothing and footwear prices, especially women's shoes, which went up by 1.7% on the month, compared with 1.2% in 2017.

Mel Stride, financial secretary to the Treasury, said: "We know families feel the cost of living at the end of every working week".

As the latest Resolution Foundation report, The Living Standards Outlook, revealed, the last decade has seen the most anaemic rates of wage growth for 200 years.

In the contrary, Luigi Marinus, portfolio manager at PPS Investments said, "This relatively low level of inflation will put pressure on the Reserve Bank to cut interest rates in their next meeting". The fact that Easter is early this year could push inflation back up again in March.

However, Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said: "Inflation is falling back to the 2% target much more rapidly than the Monetary Policy Committee (MPC) expected - undermining the case for raising interest rates again as soon as May".

Jacob Deppe, the head of trading at online trading platform Infinox, added: "While the Monetary Policy Committee (MPC) meets on Thursday it seems highly unlikely that it will agree to hike rates just yet".

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