Britain’s inflation has dropped to 3.4%, marking its lowest level since 2021 and falling slightly below economists’ expectations of 3.5%. This decline provides significant relief to the government, enabling Prime Minister Rishi Sunak to continue focusing on reducing inflation.
Bank of England Governor Andrew Bailey described this development as “very encouraging and good news” in a statement to Bloomberg.
Consumer Prices on the Rise
- Consumer Prices Index Including Housing Costs (CPIH):
From February 2023 to February 2024, CPIH rose by 3.8%, a decrease from its January 2024 peak of 4.2%. - Key Contributors to CPIH and CPI:
The largest upward contributors were household services and motor fuels.
The largest downward contributors came from cafes and restaurants, which may serve as a warning sign for businesses in the food industry.
Industry Insights
- Sectors Affected by Inflation:
Inflation has impacted prices across household services, restaurants, hotels, foods, and beverages. Although these industries experienced a slight decline in inflation, price pressures remain evident. - Transport:
Prices in the transport sector saw a notable decrease of approximately 0.4% over the year to February 2024.
Monetary Policy Updates
- Bank of England Rates:
The Bank of England held interest rates steady at 5.25%, aligning with the broader global approach (excluding Switzerland). - Switzerland’s Rate Cut:
Switzerland became the first major economy to cut rates, reducing its benchmark from 1.75% to 1.50%, diverging from the prevailing trend in global monetary policy.