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Falling inflation in February ‘is sign of things to come’

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25/03/2020
UK inflation fell to 1.7% last month, dragged down by lower petrol prices, official data shows.

The Consumer Prices Index (CPI) fell 0.1 per cent in February, with housing, water, electricity and gas bills also falling, according to the Office for National Statistics (ONS).

However, the data was collated from before the coronavirus crisis hit the UK.

Since then, the Bank of England has slashed interest rates to almost zero.

Experts predict the fall last month is a sign of things to come.

“We expect the effects of the coronavirus crisis to drag inflation below 1.0% in the months ahead,” said Ruth Gregory, senior UK economist at Capital Economics.

“The coronavirus crisis will reduce core goods and services inflation, with the earliest effects likely to show up in the travel and tourism industries.”

She added: “We think that inflation will average just 1.2% in both 2020 and 2021 meaning that even by next year, there may be little pressure on the MPC [Monetary Policy Committee] to raise interest rates from the current all-time low of 0.10%.”

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