Inflation has fallen to its lowest level in more than two years, according to the Office for National Statistics (ONS).

The growth in food prices across the UK eased in February, with the Consumer Price Index dropping to 3.4 per cent, down from 4 per cent in January, and the lowest level since September 2021.

UK inflation for February was slightly lower than most economists had been predicting, with many forecasting inflation levels at 3.5 per cent for last month.

Inflation is now closer towards the Bank of England’s 2 per cent target and comes ahead of the latest interest rate decision on Thursday.

York Press:

Policymakers are widely expected to keep rates on hold at 5.25%, but the steep fall in the CPI is likely to reinforce expectations that the Bank is moving closer to cutting rates later this year.

Grant Fitzner, chief economist at the ONS, said: “Inflation eased in February to its lowest rate for nearly two-and-a-half years.

“Food prices were the main driver of the fall, with prices almost unchanged this year compared with a large rise last year, while restaurant and café price rises also slowed.

“These falls were only partially offset by price rises at the pump and a further increase in rental costs.”

Ellie Henderson at Investec, who had predicted a CPI at 3.6 per cent for February, said the sharp drop in inflation is likely to come as last year’s big rises in costs for non-alcoholic drinks and clothing and footwear were not repeated this year.

She cautioned there were still some inflation pressures, however, with higher fuel prices being seen on forecourts.

Ms Henderson said: “There is also the risk that the disruption in the Red Sea resulted in higher input costs for producers in February, some of which could have been passed onto the consumer.

“There is also the potential that the extra health certificate requirements that were introduced at the start of the month for medium-and-high-risk plant and meat imports from the EU caused a material increase in consumer prices.”

She stressed that inflation is still significantly higher than the Bank’s 2 per cent target.

“There is still some way to go to bring inflation back to target and as other countries, such as the US, have demonstrated, once all the low-hanging fruit has been picked, the last stretch to 2 per cent can often be the most difficult,” according to Ms Henderson.