UK inflation hits its lowest in nearly a year at 3%
British inflation has run higher than in the United States and in the euro zone
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[LONDON] Britain’s annual rate of consumer price inflation in January fell to its lowest since March last year but a measure of underlying price pressures, closely watched by the Bank of England (BOE), remained strong, official figures showed on Wednesday (Feb 18).
Consumer prices rose by 3 per cent in annual terms last month, slowing from a 3.4 per cent increase in December, the Office for National Statistics (ONS) said, as transport, food and non-alcoholic drink prices rose less quickly.
A Reuters poll of economists had shown a median forecast for headline inflation of 3 per cent in January. The BOE projected earlier this month that it would ease to 2.9 per cent.
Wednesday’s data showed inflation for services, closely watched as a gauge of domestic price pressures by the BOE, slowed by less-than-expected to 4.4 per cent from 4.5 per cent in December, above poll expectations for a fall to 4.3 per cent.
British inflation has run higher than in the United States and in the euro zone where it stood at 2.4 per cent and 1.7 per cent respectively in January.
Sterling was little changed against the US dollar after the ONS data.
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The BOE expects the pace of price rises to slow sharply to almost its 2 per cent target in April as last year’s rises in utility costs and other government-controlled tariffs fall out of the annual comparison.
Investors mostly expect the central bank to cut its benchmark interest rate to 3.5 per cent in March after a tight vote to keep borrowing costs on hold in February. However, some policymakers remain worried about underlying inflation pressure.
Financial markets on Tuesday priced a second quarter-point interest rate cut by the BOE by the end of in 2026.
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ONS data last week painted a downbeat picture of Britain’s economy at the end of 2025 with output barely growing. Figures released on Tuesday showed the labour market was still losing jobs although there were some signs of a stabilisation. REUTERS
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