UK Inflation rate hits 12 month low

Figures released today show that UK inflation rate has dropped to 2.5%, the lowest for 12 months aiding the prospect of economic growth.

According to figures released from the Office National Statistics, UK inflation rate has fallen to 2.5%, a fall of 0.5% in just 2 months, the first time since the summer of 2015 that the UK inflation rate has fallen for two consecutive months.

Household were among those who welcomed the new figures as wages have, overall, failed to keep up with the increases in the cost of living which has unexpectedly slowed as the pressure eases on the cost of household living.

The report showed that the price of both clothing, women’s clothing in particular and, bizarrely enough, footwear while tobacco and alcohol eased the pressure as costs and duty are now addressed in the Chancellor’s Autumn budget rather than in March as previously.

In both February and March, prices rose only by 0.7% compared with 2% in the same period in 2017.

These latest figures put pressure on the Bank of England who were widely expected to increase interest rates next month to 0.75% following last November’s increase, the first in 10 years.

The latest UK inflation rate has also impacted on the currency markets where the £GBP fell around a cent against both the US dollar and the Euro. Earlier this week sterling has risen against the dollar – to $1.4335 – the highest since the UK voted to leave the European Union.

Mike Hardie, head of inflation at the ONS, also commented that growth in the price of goods leaving factories continued to slow, due mainly to a smaller increase in the price of food products compared with this time last year.

The most common approach to measuring inflation is the 12-month inflation rate, which compares prices for the latest month with the same month a year ago. In any given month, the 12-month rate is determined by the balance between upward and downward price movements of the range of goods and services included in the index.

Chart: ONS