April 21, 2024

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Food costs and eating out lead to lower inflation

Food costs and eating out lead to lower inflation

Image source, Getty Images

Inflation fell to 3.4% in February, down from 4% in January, and close to the bank's 2% target.

This decline means that the cost of living is rising at its slowest pace since September 2021, when it reached 3.1%.

Inflation, the rate at which prices rise over time, has been declining gradually since reaching 11.1% in October 2022, its highest rate in 40 years.

The Office for National Statistics (ONS) said food price inflation was the main reason for the decline.

However, prices have not fallen yet, and are even rising less quickly than before.

Most economists expected this decline and said it would reinforce expectations that the Bank of England would cut interest rates later in the year.

This figure comes ahead of the latest interest rate decision on Thursday, which is expected to see interest rates remain at 5.25%.

While the drop in inflation will be welcomed by the government, it follows official data released last month that confirmed the UK fell into recession at the end of last year.

Grant Fitzner, chief economist at the Office for National Statistics, said one reason for the larger-than-expected drop in last month's figures was a drop in food price inflation, which fell “slightly” from 6.9% to 5%.

“These declines were only partially offset by higher prices at pumping stations and a further increase in rental costs.

“But the overall trend is still lower,” Fitzner said.

While the ONS did not reflect the fall in energy prices in its calculations, the economist said the Bank of England and the Office for Budget Responsibility expected a further decline in inflation.