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UK inflation falls to 2.7% as the Brexit price squeeze starts to slow

The UK's latest inflation numbers were published on Tuesday morning.

  • UK consumer price inflation (CPI) rate falls to 2.7% in February, down from the 3% level seen in January, according to the Office for National Statistics.
  • CPI measures the weighted average of prices of a basket of goods and services, such as food, transportation, and medical care.
  • The Brexit-driven fall in the pound pushed up inflation over the last 18 months, but those effects are now slowing, and prices are rising more slowly.
  • "A small fall in petrol prices alongside food prices rising more slowly than last year helped pull down inflation," Phil Gooding, the ONS' head of consumer price inflation said.
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LONDON — The level of inflation fell in February, with the worst of the Brexit driven prices increases seen in the UK in the last 18 months now appearing to be over.

The Office for National Statistics said on Tuesday that the UK's Consumer Prices Index (CPI) inflation rate — the key measure of inflation — was 2.7% in February, down from January's 3% level, and lower than economists' forecasts of 2.8%.

CPI measures the weighted average of prices of a basket of goods and services, such as food, transportation, and medical care.

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The sharp fall in the value of the pound following the UK's vote to leave the EU in the summer of 2016 has raised the cost of imports and pushed up the rate of inflation.

Most major forecasters believed that inflation would peak in late 2017, and start to fall as 2018 progresses, thanks in part to sterling's recent recovery to more than $1.40. Those forecasts now appear to be materialising, with inflation dropping 0.3 percentage points in the month, a significant fall.

Inflation's consistent overshooting of the Bank of England's government mandated 2% target over the past year or so is one of the main drivers for the bank's recent assertions that it will likely raise interest rates faster, and to a greater extent than previously expected during 2018.

However, Tuesday's number — which the Bank of England was given special early access to — suggests that inflation is set to fall sharply as the year progresses, potentially slowing the pace of any BoE rate hikes in 2018.

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