Falling fuel prices eases inflation rate to seven-month low

UK consumer price

Prices were 2.7% higher than a year ago, according to data from the Office for National Statistics, down from 3% in January.

The Bank of England expects wages to grow more quickly than inflation later this year.

Lower petrol prices and cheaper hotel rooms - compared to a period past year when price readings were taken on Valentine's Day - were among the reasons for the decline, which was slightly bigger than expected.

Transport prices dragged on the cost of living in February, securing a smaller month-on-month rise of 0.5% in contrast to 1.2% previous year.

"It looks like the impact of a weaker pound is finally wearing off and inflation is gradually heading back towards" the Bank of England's 2.0-percent target, noted Laith Khalaf, senior analyst at Hargreaves Lansdown stockbrokers.

The Consumer Prices Index including owner-occupiers' housing costs (CPIH) - the ONS' preferred measure of inflation - was 2.5 per cent last month, down from 2.7 per cent the month before.

Previously, UK inflation rose from 0.3% in June 2016, the month of the Brexit referendum, to a high of 3.1% in November 2017.

Food and non-alcoholic beverages prices rose 3.9 percent annually and alcoholic beverages and tobacco prices climbed 6.1 percent.

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Mel Stride, financial secretary to the Treasury, said: "We know families feel the cost of living at the end of every working week".

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.

Inflation fell to a seven-month low last month raising hope that there has been a "turning point" in Britain's Brexit-linked cost-of-living squeeze.

Prices in London alone were 2.1 percent higher than a year earlier compared with a 1.8 percent rise in December.

As the latest Resolution Foundation report, The Living Standards Outlook, revealed, the last decade has seen the most anaemic rates of wage growth for 200 years.

"Core inflation probably fell back too, from 2.7% in January to 2.5%, which is likely to mark the beginning of a more sustained downward trend in inflation this year".

"The drop in inflation. creates some breathing space for the BoE's Monetary Policy Committee when it comes to increasing interest rates", said Kevin Doran, chief investment officer at AJ Bell.

"As a result, we still think that the MPC will raise interest rates... in May", they added.

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