Inflation falls to 2.7%: ONS

Alicia Cross
March 21, 2018

-Core inflation seen falling to 2.5% in February, down from 2.7%. This perception will be key to expectations for the next Bank of England interest rate rise and the performance of Pound Sterling in the short term.

The consumer price index including occupiers' housing costs (CPIH) was 2.5 percent in February, compared to 2.7 percent in January.

The ONS said that a small fall in petrol prices alongside food prices rising more slowly than past year helped pull down inflation, as numerous early 2017 price increases due to the previous depreciation of the pound have started to work through the system.

It seems United Kingdom inflation is moving the right way withy another small fall in February, down to 2.7% from 3% in January, as measured by the Consumer Prices Index. With inflation still above the Bank's 2% target, we should expect the monetary policy committee to raise the base rate from its "emergency" level in due course.

The rand traded steady at around R12 to the United States dollar after the release of the data, as the global market remains the driver now, said TreasuryONE dealer Wichard Cilliers.

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The Pound was also quoted higher against the entire G10 basket, with its largest gains coming over the Japanese Yen.

Mr Parikh added that this month's drop in inflation "combined with tepid business activity and the inclement weather this quarter" added clout to calls for holding fire on an interest rate rise later this week.

The move in inflation came largely in response to the double digit referendum-induced devaluation of Sterling, which raised the cost of imported goods for companies and consumers.

Paul Hollingsworth of Capital Economics does not believe that this lower than expected figure will put the MPC off an interest rate hike this May.

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