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UK inflation continues to fall

The Consumer Prices Index (CPI) fell to 3.4% in February, from 3.6% the month before, according to the Office for National Statistics. This means that inflation has been on a downward path since September last year, and has fallen to its lowest rate since November 2010. The recent trend can be seen in the Figure below.

RPI and CPI Percentage changes over 12 months

Source: ONS

The reason for the decline in the CPI inflation rate was largely due to falls in the average gas and electricity bills. The Retail Prices Index (RPI) also fell to 3.7% from 3.9%.

Spencer Dale, the Bank of England’s Chief Economist, said in a speech yesterday that “we are not out of the woods yet” as far as inflation is concerned. He thought that CPI inflation would continue to fall further towards the government’s target of 2.0% over the coming months, but thought that “how far and fast inflation will fall thereafter” to be more uncertain. He was particularly concerned about the possible impact of soaring oil prices.

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Posted in Consumer Price Index, Inflation

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