United Kingdom inflation falls to lowest in 12 months

There were 1.42million unemployed people down 16,000 on the last set of figures and 136,000 lower than a year ago

The squeeze on wages ended today as inflation fell to 2.5 per cent, falling below pay rises for the first time in more than a year.

Real earnings started shrinking a year ago, when inflation overtook pay, but the Office for National Statistics says that the trend was reversed in the three months to February.

However, if the traditional measure of inflation, the consumer price index (CPI) is used, then inflation is running above wages at 2.9% vs 2.8%. The bank is tasked with setting policy to achieve an inflation rate of around 2 percent and updated figures due Wednesday are not expected to show much change in the annual rate in March.

United Kingdom inflation slowed to a one year-low in March, diminishing scope for a rate hike in May as markets widely expect.

Coupled with rising wages and record levels of employment, this is a boost to spending power.

"The labour market continues to be strong, and for the first time in nearly a year, earnings have grown slightly after inflation has been taken into account", said Matt Hughes at the ONS.

On the back of the news, sterling fell by 0.74% against the dollar to $1.41.




Suren Thiru, head of economics at the British Chambers of Commerce, said: "The continued rise in employment, coupled with a further drop in the unemployment rate, is further evidence that the United Kingdom jobs market remains in good shape, with firms continuing to recruit despite sluggish economic conditions".

Neil Birrell, chief investment officer at Premier Asset Management, said: "Overall, this is likely to impact interest rate expectations".

Yesterday we had wage stats, today it's inflation stats. This was the weakest rate since March 2017, when prices gained 2.3 percent.

Food prices rose 0.3 per cent compared with a month earlier, versus a 0.6 per cent rise over the same period in 2017, with fruit and fish applying the most downward pressure, having fallen 1.4 per cent and 1.3 per cent respectively.

In February, the Bank of England had projected inflation to remain close to 3 percent in the first quarter and signaled somewhat earlier- and deeper-than-expected rate hikes.

Inflation dropped to 2.5% in February, giving consumers feeling the pinch some welcome relief.

Though the British economy is one of the laggards among industrial nations, with growth easing since the Brexit vote, it is operating near its capacity, which could stoke inflation.

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