UK households get some relief as inflation dips

March 20, 2018 - 6:21 am

LONDON (AP) — Inflation in Britain eased markedly during February, official figures showed Tuesday, in a development that will help ease the pressure on households who have seen price rises outstrip wage increases for months.

The Office for National Statistics said consumer price inflation in the year to February stood at 2.7 percent. That was down on January's rate of 3 percent and takes inflation to its lowest level since July.

The decline was largely due to transport and food prices, which rose by less than a year ago.

Though inflation has eased back, many economists think that the Bank of England will raise interest rates again in May, as prices are still rising more than it wants — the bank is tasked with keeping inflation close to 2 percent.

The bank raised its benchmark rate by a quarter-point to 0.5 percent in November, its first increase in a decade, largely to get inflation back to target. Its economic projections suggested that it may need to raise interest rates again soon, despite uncertainty surrounding Britain's exit from the European Union.

Many economists think that Monday's deal between the British government and the EU on the outlines of a transition period after Brexit day on March 29, 2019, makes a rate hike more likely. Bank of England Governor Mark Carney said confirmation of a transition deal, which should give some certainty to businesses, could make the bank reassess its outlook for the economy.

The British economy has slowed sharply since the country voted to leave the EU in June 2016 as businesses reined in investment and consumer spending eased after inflation spiked following the pound's fall, raising the cost of imported goods like energy and food. Wage increases have not kept pace with the rise in prices.

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