Cost of food and eating out leads to decline in inflation

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Inflation fell to 3.4% in February from 4% in January and inched closer to the bank’s target of 2%.

The decline means the cost of living is rising at the slowest pace since September 2021, when it stood at 3.1%.

Inflation, the rate at which prices rise over time, has been falling slowly since reaching 11.1% in October 2022, its highest rate in 40 years.

The Office for National Statistics (ONS) said the main reason for the decline was food price inflation.

However, prices are not falling yet, they are rising less rapidly than before.

Most economists had predicted a decline and said it would increase expectations that the Bank of England would cut interest rates at the end of the year.

The figure comes ahead of its latest interest rate decision on Thursday, with rates expected to remain at 5.25%.

While the fall in inflation will be welcomed by the government, it follows official data from last month, which confirmed Britain had fallen into recession late last year.

ONS chief economist Grant Fitzner said one reason for the bigger-than-expected fall in last month’s figures was a drop in food price inflation which fell “substantially” to 5% from 6.9%.

“This is the 11th consecutive monthly decline… actually we have not seen much change in food prices over the last nine months, they have been almost stable,” he said.

“These declines were only partially offset by increases in prices at the pump and further increases in rental costs.

“But the general trend remains low,” Mr. Fitzner said.

While the ONS did not reflect the fall in energy prices in its calculations, the economist said the Bank of England and the Office for Budget Responsibility were forecasting a further fall in inflation.

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