UK inflation stays at 0.3 per cent in February

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The UK's inflation rate remained at 0.3 per cent in February, according to data released this morning by the Office for National Statistics.

Inflation, as measured by the year-on-year change in the consumer price index, was equal to January's 12-month high of 0.3 per cent in January.

Transport costs were the biggest downward contributor falling 1.1 per cent on the year compared with 0.7 per cent in January. This was partially offset by food prices, which fell at 2.4 per cent, a slower rate than January's 2.8 per cent.

Core inflation, which strips out volatile food and energy prices, remained at 1.2 per cent. Rising prices in the service sector were offset by a sharper fall in core goods prices. Core inflation gives an indication of where inflation is likely to end up once one-off shocks to energy and food prices have fallen out of the annual comparison.

The Bank of England, which adjusts interest rates to keep inflation at two per cent, expects inflation to remain below one per cent for the remainder of this year.

“There are still few signs of any inflationary pressures. Currently, it is difficult to identify any reason why there should be a material pickup in inflation, at least until the base effects from the collapse in the oil price at the end of 2015 start to take effect towards the end of this year. As such, we do not expect the CPI rate to reach one per cent until December," said Martin Beck, senior economic advisor to the EY Item Club.

“This places the [Bank of England's] monetary policy committee in a relatively comfortable position. The Committee can allow a very accommodative monetary stance to continue to offer stimulus to offset the dampening effects of very tight fiscal policy and soft global growth. We continue to expect the first rate rise to come in the middle of 2017, with the risks skewed towards a later rise."

Full story: UK inflation stays at 0.3 per cent in February: City A.M.

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